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Capital Southwest (CSWC) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank #2 (Buy).
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Capital Southwest: Hefty 9% Yield Supported By Low Operating Costs
Capital Southwest has grown their dividend by a CAGR of 21.26% over the last decade. Their investment portfolio is highly rated and mostly comprised of floating rate loans. The current dividend yield for CSWC is 9.5%, and the company has declared a supplemental dividend due to high levels of income. However, future interest rate increases may stop supplementals.
Capital Southwest is a mid-sized business development company, or BDC, with a rather conventional investment strategy trading at a premium above the underlying NAV base. Despite the premium, Capital Southwest carries several aspects, which clearly distinguish it from the peers, fully justifying the premium. In this article, I elaborate on these aspects and provide my thinking on why Capital Southwest is a buy for me.
We take a look at the action in business development companies through the third week of February and highlight some of the key themes we are watching. BDCs experienced a strong 2% total return this week, recovering from previous weakness. Investors should consider sustainable sources of performance apart from traditional investment income that can create a competitive advantage for BDCs.
Capital Southwest is entering into a sustained circle of virtue. With rates remaining stubbornly higher, management is taking precautions for the future. Owning standard-bearer investments can help de-risk your portfolio.
We take a look at the action in business development companies through the first week of February and highlight some of the key themes we are watching. BDC fell on the week with an average drop of 2.5%. BDCs are reducing their management, likely reflecting the increasing competition in the private credit sector.
Capital Southwest (CSWC) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank #2 (Buy).
Capital Southwest (CSWC) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.