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Prospect Capital: A 'Red Flag' Investment
Prospect Capital Corporation (PSEC) has delivered a 65% price decline over the past decade, with persistent book value erosion and repeated dividend cuts. PSEC is transitioning its portfolio toward lower-risk first-lien loans, now at 71%, but still faces high market skepticism reflected in a 59% NAV discount. Despite a 20% forward dividend yield and 1.26x coverage, PSEC's high PIK income and unclear future portfolio composition raise concerns about dividend sustainability.
Prospect Capital Corporation (PSEC) Q1 2026 Earnings Call Transcript
Prospect Capital Corporation ( PSEC ) Q1 2026 Earnings Call November 7, 2025 9:00 AM EST Company Participants John Barry - Chairman of the Board & CEO Kristin Van Dask - CFO, Treasurer, Secretary & Chief Compliance Officer Michael Eliasek - President, COO & Director Conference Call Participants Finian O'Shea - Wells Fargo Securities, LLC, Research Division Presentation Operator Good day, and welcome to the Prospect Capital First Fiscal Quarter 2026 Earnings Release and Conference Call. [Operator Instructions] Please note, this event is being recorded.
Prospect Capital: 15% Yield Headed For Another Cut
Previously maintained a cautious hold rating on Prospect Capital, favoring bonds over common stock and preferred shares. The stock has heavily underperformed and justified the decision to stay out. We go over the recent results and tell you why the new dividend is likely to get cut within a year.
Prospect Capital Corporation (PSEC) FAQ
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Prospect Capital Corporation Profile
| Capital Markets Industry | Financials Sector | John Francis Barry III, CEO | NASDAQ (NGS) Exchange | 74348T102 CUSIP |
| US Country | - Employees | 28 Jan 2026 Last Dividend | - Last Split | 27 Jul 2004 IPO Date |
Overview
Prospect Capital Corporation operates as a business development company, focusing primarily on the middle market and aiming to provide a broad range of financial solutions. It targets mature companies, as well as those in later stage and emerging growth phases, engaging in leveraged buyouts, refinancing, acquisitions, recapitalizations, and turnaround situations. The company places a strong emphasis on generating growth capital and addressing the needs for development, capital expenditures, and structured subordinated debt tranches, including those of collateralized loan obligations. Prospect Capital invests in secured debt, senior debt, equity, and a variety of loan formats, catering to a diverse portfolio of business needs. With a strategic eye on real estate, especially multi-family residential properties, the company encompasses a comprehensive investment approach. It primarily serves the United States and Canada, focusing on small to medium-sized private companies across multiple sectors.
Products and Services
- Mezzanine Finance & Later Stage Investments:
Specializing in providing mezzanine finance and capital for companies in their later stages, focusing on growth and transitional phases.
- Leveraged Buyouts, Refinancing, and Acquisitions:
Offering financial solutions for leveraged buyouts, refinancing existing debts, and facilitating acquisitions to drive business expansion and consolidation.
- Recapitalizations & Turnaround Initiatives:
Engaging in recapitalization efforts and providing necessary support for turnaround situations to revitalize companies.
- Growth Capital & Development:
Funding the growth capital and development needs of companies, supporting their expansion and operational advancements.
- Capital Expenditures:
Offering financing options for capital expenditures, enabling companies to invest in physical assets for their long-term benefit.
- Subordinated Debt and Collateralized Loan Obligations:
Providing subordinated debt options and investing in collateralized loan obligation tranches to offer layered financial solutions.
- Marketplace Lending & Bridge Transactions:
Engaging in marketplace lending and offering bridge loans to support companies during transitional funding periods.
- Real Estate Investments:
Making targeted investments in the real estate sector, with a particular focus on the multi-family residential real estate asset class.
- Private Debt & Equity Investments:
Investing in private debt and equity stakes in private and microcap public businesses, across various industry sectors.
- Primary and Secondary Loans/Portfolios:
Focusing on both the origination of primary loans and the acquisition of secondary loan portfolios, catering to diverse financing needs.
- Sector-Specific Investments:
Targeting investments across all industry sectors with expertise in energy and industrial sectors, including aerospace, defense, financial services, healthcare, and technology among others.
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