Some Business Development Companies have had a rough 2025 due to the declining interest rate environment. In 2026, I suspect we could see more rate cuts, potentially leading to underperformance in the sector (Formerly known as "The Dividend Collectuh." Top 1% of financial experts on TipRanks. Contributing analyst to the iREIT+Hoya Capital investment group. Dividend Collection Agency is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. ...

Some Business Development Companies have had a rough 2025 due to the declining interest rate environment. In 2026, I suspect we could see more rate cuts, potentially leading to underperformance in the sector (Formerly known as "The Dividend Collectuh." Top 1% of financial experts on TipRanks. Contributing analyst to the iREIT+Hoya Capital investment group. Dividend Collection Agency is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. ...

My professional journey in the investment field began in 2011. Today, I combine the roles of an Investment Consultant and an Active Intraday Trader. This synergistic approach allows me to maximize returns by leveraging deep knowledge in economics, fundamental investment analysis, and technical trading. What You Will Find in My Analysis: Clear, actionable investment ideas designed to build a balanced portfolio of U.S. securities. A combination of macro-economic analysis and direct, real-world trading experie ...

Core Insights - The article emphasizes the importance of combining investment consulting with active intraday trading to maximize returns through a deep understanding of economics and investment analysis [1]. Group 1: Investment Strategy - The approach focuses on identifying profitable and undervalued investment opportunities primarily in the U.S. market [1]. - The analysis aims to create a balanced portfolio of U.S. securities, leveraging macro-economic insights and real-world trading experience [1]. Group 2: Professional Background - The individual has a decade of experience in the investment field, starting in 2011, with dual degrees in Finance and Economics [1]. - Expertise is claimed to be developed through active practice in management and trading rather than solely through academic qualifications [1].

Capital Southwest Corporation (NASDAQ:CSWC) is included among 10 Best Monthly Dividend Stocks to Buy Now. Capital Southwest Expands Private Credit Reach Through New Joint Venture On January 22, Capital Southwest Corporation (NASDAQ:CSWC) announced the formation of a joint venture with another private credit asset manager. The new venture will operate as an off-balance-sheet private fund focused mainly on first-out senior secured debt investments in the lower middle market. Ownership of the joint venture ...

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Management emphasized the company’s undistributed taxable income (UTI) position. CEO Michael Sarner said UTI stood at $1.02 per share , supported by realized gains from equity exits. Over the last 12 months, the company harvested $44.5 million in realized gains from equity exits, which Sarner said helped lift UTI from $0.68 per share in December 2024. Subsequent to quarter-end, the company realized an additional $6.8 million gain from another equity exit.Rehberger noted PIK income increased $1.8 million , w ...

Financial Data and Key Metrics Changes - Pre-tax net investment income was $34.6 million, or $0.60 per share, an increase from the previous quarter [16] - Total investment income rose to $61.4 million from $56.9 million, driven by increases in PIK income, fees, and dividend income [16][18] - Undistributed taxable income (UTI) increased to $1.02 per share, up from $0.68 per share in December 2024 [3][17] - NAV per share increased to $16.75 from $16.62 in the prior quarter [18] Business Line Data and Key Metrics Changes - Closed $244 million in total new commitments across eight new portfolio companies and 16 existing portfolio companies [4] - The weighted average spread on new commitments was approximately 6.4% [5] - The on-balance sheet credit portfolio ended at $1.8 billion, representing a 19% year-over-year growth [10] - 100% of new portfolio company debt originations were first lien senior secured [10] Market Data and Key Metrics Changes - Approximately 93% of the credit portfolio is sponsor-backed, providing strong governance and operational support [10] - The credit portfolio generated a weighted average yield of 11.3% with a weighted average leverage of 3.6x EBITDA [12] - Cash flow coverage improved to 3.4 times, up from 2.9 times during peak base rates [14] Company Strategy and Development Direction - The company announced a joint venture to enhance competitiveness in the lower middle market, allowing participation in larger, higher-quality deals [7] - The joint venture is expected to generate low to mid-teens equity returns for the company [7] - The company aims to maintain disciplined growth and create long-term value for shareholders [21][73] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the competitive position in the lower middle market despite challenges faced by peers [25] - The company is focused on executing its strategy and maintaining a conservative leverage cushion to mitigate capital market volatility [19][73] - Management noted that the lower middle market remains active, with private equity sponsors still looking for deals [32] Other Important Information - The company has a robust liquidity position with approximately $438 million in cash and undrawn leverage commitments [19] - Non-accruals represented just 1.5% of the investment portfolio at fair value [16] Q&A Session Summary Question: Can you expand on the competitive dynamics in the lower middle market? - Management noted that while regional banks have fluctuated in their lending, the competitive landscape remains stable with fewer BDCs currently trading at book value [24][25] Question: What is the outlook for spreads in the coming quarters? - Management indicated that spreads have stabilized, with expectations to remain between 7% and 7.25% over the next 12 months [26] Question: What is the breakdown of the portfolio between sponsored and non-sponsored deals? - The portfolio consists of approximately 93% sponsored and 7% non-sponsored deals [30] Question: How are sponsors behaving in the current market environment? - Sponsors are still looking for deals, although last year was considered weak for deployment [31] Question: How is AI disruption risk being evaluated in the portfolio? - The company has formed an AI committee to assess AI risks in existing and new investments, indicating a proactive approach to potential disruptions [68]

Financial Data and Key Metrics Changes - The company generated pre-tax net investment income of $0.60 per share, with total investment income increasing to $61.4 million from $56.9 million in the prior quarter [3][16] - The undistributed taxable income (UTI) balance rose from $0.68 per share in December 2024 to $1.02 per share, reflecting strong realized gains of $44.5 million from equity exits over the last 12 months [3][16] - The company declared total dividends of $0.64 per share for the March quarter, including a regular dividend of $0.58 and a supplemental dividend of $0.06 [4][17] Business Line Data and Key Metrics Changes - The company closed $244 million in total new commitments across eight new portfolio companies and 16 existing portfolio companies, with add-on financings representing 29% of total new commitments [4] - The weighted average spread on new commitments was approximately 6.4%, which is considered attractive in the current competitive environment [5] - The on-balance sheet credit portfolio ended the quarter at $1.8 billion, reflecting a 19% year-over-year growth from $1.5 billion [10] Market Data and Key Metrics Changes - The credit portfolio generated a weighted average yield of 11.3% with a weighted average leverage of 3.6x EBITDA [12] - Approximately 93% of the credit portfolio is sponsor-backed, providing strong governance and operational support [10] - Cash flow coverage improved to 3.4x, up from 2.9x during the peak of base rates, indicating strong portfolio performance [14] Company Strategy and Development Direction - The company announced a joint venture with a private credit asset manager to enhance competitiveness in the lower middle market, allowing participation in larger, higher-quality deals [7][8] - The joint venture is expected to generate low to mid-teens equity returns for the company, reinforcing its strategy of disciplined growth and long-term value creation [7][8] - The company aims to maintain a conservative leverage cushion to mitigate capital market volatility while continuing to raise secured and unsecured debt capital [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the competitive position in the lower middle market, noting a reduction in competition from peers due to dividend cuts among other BDCs [25] - The company remains focused on executing its strategy and maintaining disciplined growth, with a strong emphasis on risk management and portfolio granularity [21][22] - Management highlighted the importance of maintaining strong relationships with private equity sponsors, which continue to seek opportunities despite a challenging market environment [31][32] Other Important Information - The company raised approximately $53 million in gross equity proceeds through its Equity ATM Program at a weighted average share price of $21.11, reinforcing its ability to raise capital efficiently [6][18] - The liquidity position remains robust, with approximately $438 million in cash and undrawn leverage commitments, representing more than 1.5x coverage of unfunded commitments [19] Q&A Session Summary Question: Competitive dynamics in the lower middle market - Management noted that while regional banks have become more active, the competitive landscape remains stable, with fewer BDCs currently offering dividends [24][25] Question: Outlook for spreads - The company expects spreads to remain between 7% and 7.25% over the next 12 months, with recent deals showing spreads in the mid-sixes [26] Question: Breakdown of portfolio between sponsored and non-sponsored - The portfolio consists of approximately 93% sponsored and 7% non-sponsored deals, with sponsors still actively seeking opportunities [30] Question: Activity level in deal flow - Management expressed bullishness regarding deal flow, citing strong sponsor relationships and the recent joint venture as key factors for future growth [37][39] Question: AI disruption risk evaluation - The company has established an AI committee to assess AI risks in existing and new investments, indicating a proactive approach to potential disruptions [69]

Financial Data and Key Metrics Changes - Pre-tax net investment income was $34.6 million, or $0.60 per share, an increase from the previous quarter [13] - Total investment income rose to $61.4 million, up from $56.9 million in the prior quarter, driven by increases in PIK income, fees, and dividend income [13][14] - The company's undistributed taxable income (UTI) balance increased to $1.02 per share, up from $0.68 per share in December 2024 [3] Business Line Data and Key Metrics Changes - The company closed $244 million in total new commitments across eight new portfolio companies and 16 existing portfolio companies [4] - The weighted average spread on new commitments was approximately 6.4%, considered attractive in the current competitive environment [5] - The on-balance sheet credit portfolio ended the quarter at $1.8 billion, representing a 19% year-over-year growth from $1.5 billion [8] Market Data and Key Metrics Changes - Approximately 93% of the credit portfolio is sponsor-backed, providing strong governance and operational support [8] - The credit portfolio generated a weighted average yield of 11.3% with a weighted average leverage of 3.6x EBITDA [10] - Non-accruals represented just 1.5% of the investment portfolio at fair value [14] Company Strategy and Development Direction - The company announced a joint venture with a private credit asset manager to enhance competitiveness in the lower middle market [6] - The joint venture is expected to allow participation in larger, higher-quality deals while maintaining disciplined hold sizes [6] - The company aims to maintain a conservative leverage cushion to mitigate capital market volatility [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the competitive position in the lower middle market, noting a reduction in competition from peers who have cut dividends [22] - The company anticipates continued strong deal flow and is bullish about net portfolio growth due to enhanced sponsor relationships and the new joint venture [34] - Management is actively evaluating AI disruption risks in both existing assets and new originations, indicating a proactive approach to potential market changes [67] Other Important Information - The board declared a total of $0.64 per share in dividends for the March quarter, maintaining strong dividend coverage [15] - The company's liquidity position remains robust, with approximately $438 million in cash and undrawn leverage commitments [17] - NAV per share increased to $16.75, up from $16.62 in the prior quarter, driven by the equity ATM program [16] Q&A Session Summary Question: Competitive dynamics in the lower middle market - Management noted that while regional banks have entered the market, competition has decreased as many BDCs have cut dividends, positioning the company favorably [22] Question: Outlook for spreads - Current spreads on debt have held steady, with expectations to remain between 7% and 7.25% over the next 12 months [24] Question: Breakdown of portfolio between sponsored and non-sponsored - The portfolio is currently 93% sponsored and 7% non-sponsored, with sponsors still actively seeking deals despite a challenging environment [27] Question: Activity expectations for deal flow - Management expressed bullishness for the upcoming year, citing strong sponsor relationships and the new joint venture as key drivers for growth [34] Question: AI disruption risk evaluation - The company has formed an AI committee to assess risks and opportunities related to AI in their investment process [67]