Prospect CapitalNASDAQ: PSEC

PSEC offers a high distribution yield of 12.8% and trades at a significant discount to its net asset value. However, this discount doesn't necessarily mean that PSEC is a buy. The majority of PSEC's investments are within the real estate sector, which may be impacted by rising interest rates. PSEC's dividend has remained the same since 2017, showing inconsistent growth compared to peers, especially internally managed BDCs.

Prospect Capital Corporation's loan quality and dividend coverage remain healthy. The BDC is originating new loans, which will contribute to its net investment income and potentially improve dividend coverage. Despite a 37% discount to net asset value, the stock's 13% yield makes it a worthwhile investment for passive income investors.

Prospect Capital's share price has declined double-digits over the past year due to weaker fundamentals and portfolio quality. The company's declining financials and NAV erosion are concerning, but it still offers a monthly dividend with a comfortable coverage ratio. The stock is undervalued with a P/NAV ratio of 0.63x, but risks include exposure to the high interest rate environment and real estate market.

PSEC offers a monthly dividend distribution of $0.06/share that has not grown since 2017. There are better alternative BDCs out there offering superior portfolio investments that have better capitalized on the higher interest rate environment. Interest rates remain a threat to PSEC's total Net Investment Income. Rate cuts are anticipated in the latter half of 2024 and can result in lower profitability metrics.

Prospect Capital's stock price dropped 7% after reporting quarterly earnings, despite well-covered dividends and a low non-accrual ratio. Passive income investors have an opportunity to buy shares at a discount to net asset value. Prospect Capital's portfolio is well-diversified and its non-accrual situation is exceptionally good, making it a favorable investment.

Prospect Capital saw its NAV per share fall by 33 cents year-over-year during its recently reported quarter. Dividend coverage at 133% remains significant, but it is down from 150% a year ago. Net investment income per share dipped by 3 cents year-over-year, with the outlook for a recovery made dark with Fed rate cuts on the horizon.

Prospect Capital Corporation (PSEC) Q2 2024 Earnings Call Transcript

Prospect Capital (PSEC) came out with quarterly earnings of $0.24 per share, beating the Zacks Consensus Estimate of $0.22 per share. This compares to earnings of $0.27 per share a year ago.

Prospect Capital Corporation is a popular stock for income investors due to its monthly dividend of $0.06. PSEC has underperformed compared to other Business Development Companies in terms of price and total returns over the past 3, 5, and 10 years. PSEC's dividend has remained stagnant at $0.06 for the past 7 years, while other BDCs have raised their dividend and paid out special and supplemental dividends.