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: Out-Of-Touch Valuation
Prospect Capital's dividend cut has improved payout safety, aligning distributions with lower net investment income and enhancing the margin of safety for passive income investors. The portfolio shift toward first-lien debt has stabilized credit quality, with non-accruals remaining low at 0.6%, despite a decline in overall income. High insider ownership (29%) and a 55% discount to NAV suggest the stock is undervalued, offering a compelling risk/reward for patient investors.
Prospect Capital Corporation (PSEC) Q3 2025 Earnings Call Transcript
Prospect Capital Corporation (NASDAQ:PSEC ) Q3 2025 Earnings Conference Call May 9, 2025 9:00 AM ET Company Participants John Francis Barry - Chairman of the Board & Chief Executive Officer Michael Grier Eliasek - President and Chief Operating Officer Kristin Van Dask - Chief Financial Officer, Treasurer, Secretary, and Chief Compliance Officer Conference Call Participants Finian O'Shea - Wells Fargo Operator Good day and welcome to the Prospect Capital Third Fiscal Quarter Earnings Release and Conference Call. All participants will be in a listen-only mode.
Prospect Capital Corporation (PSEC) Q2 2025 Earnings Call Transcript
Prospect Capital Corporation (NASDAQ:PSEC ) Q2 2025 Results Conference Call February 11, 2025 9:00 AM ET Company Participants John Barry - Chairman and Chief Executive Officer Grier Eliasek - President and Chief Operating Officer Kristin Van Dask - Chief Financial Officer Conference Call Participants Finian O'Shea - Wells Fargo Operator Hello, and welcome to the Prospect Capital Second Fiscal Quarter Earnings Release and Conference Call. All participants will be in a listen-only mode.
Prospect Capital: 8.9% On Bonds With Heavy Insider Buys
Prospect Capital's common shares remain stagnant post-dividend cut, while preferred shares have tumbled. S&P downgraded PSEC's credit rating to junk due to portfolio turbulence and liquidity pressures, impacting its ability to raise equity funding. Insider buying in PSEC has been extremely strong.
Prospect Capital: Still Steering Clear For Now (Rating Upgrade)
Prospect Capital's declining NAV and high concentration in a few large investments, like National Property REIT Corp., pose significant risks to stock performance. The shift towards higher-quality debt assets, especially first lien senior secured debt, is a positive development that could reduce portfolio risk over time. The recent dividend cut aligns payouts with net investment income, improving dividend sustainability despite a high percentage of payment-in-kind income.
PSEC: Trades At A Discount For A Reason
Prospect Capital (PSEC) operates as a business development company that generates its earnings through a portfolio of various debt investments. PSEC maintains a primary exposure to the real estate sector. This presents unique sensitivity to changes in the interest rate. The current dividend yield sits above 14% but the coverage remains thin. An decrease in portfolio quality could negatively impact the coverage.
Prospect Capital: High Yield, But With Caveats
Prospect Capital Corporation trades at a 40% discount to NAV with a near 14% yield, but market distrust stems from 17% PIK (payment in kind) interest income. Despite a diversified portfolio and strong investment income, concerns about non-accrual rates, significant losses, and tight dividend coverage persist. Insider buying by the CEO signals confidence, but uncertainties and market skepticism remain.
Prospect Capital: The Yield Is Not Worth The Risk
Prospect Capital has consistently failed to generate sufficient cash flow to cover dividends, leading to a significant risk of future dividend cuts. The company's NAV per share has declined substantially, eroding shareholder value due to poor financial management and unproductive investments. Issuing preferred stock has diluted common shareholders' value and further strained dividend coverage, with cash available for common dividends covering only 63% in FY 2024.
Prospect Capital: Lack Of Distribution Increases Limits Appeal
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.
