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Core Viewpoint - Capital Southwest Corporation has declared monthly regular dividends of $0.1934 per share for January, February, and March 2026, along with a quarterly supplemental dividend of $0.06 per share payable in March 2026 [1][3]. Dividend Details - The total regular dividends per share for the quarter ending March 31, 2026, amount to $0.58, while the total supplemental dividend per share is $0.06, leading to total dividends per share of $0.64 for the same quarter [3]. - The payment schedule for the regular monthly dividends is as follows: - January 15, 2026: $0.1934 - February 13, 2026: $0.1934 - March 13, 2026: $0.1934 [2]. Company Overview - Capital Southwest Corporation is a Dallas-based internally managed business development company with approximately $1.9 billion in investments at fair value as of September 30, 2025 [5]. - The company focuses on providing flexible financing solutions to support the acquisition and growth of middle market businesses, making investments ranging from $5 million to $50 million across various capital structures [5]. - Capital Southwest operates with a permanent capital base, allowing for creative financing solutions and long-term investments in portfolio companies [5]. Dividend Reinvestment Plan - The company maintains a Dividend Reinvestment Plan (DRIP) that allows registered stockholders to automatically reinvest dividends into additional shares of Capital Southwest's common stock [4].

Capital Southwest Corporation (NASDAQ:CSWC) is included among the 15 Extreme Dividend Stocks to Buy According to Hedge Funds. Clear Street Upgrades Capital Southwest (CSWC) to Buy After Strong Q3 Results Image by Alexsander-777 from Pixabay On November‌ 4, Cl‌ear Stre‍et up‍graded Capital Southwest Corporation (NASDAQ:CSWC) f‍rom Hold to Buy while keeping its pr⁠ice tar⁠ge‍t ste‍ady a‍t $2​2, as reported by the Fly. Th‌e firm described the recent‌ quarter a‌s another strong performance that demonstrate ...

Business Development Companies (BDCs) continue to be overlooked by investors in my opinion. Although they are considered riskier due to their interest rate sensitivity, some make for solid long-term investments. Especially, if you're an income-focused investor like myself.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. This is for education ...

Core Viewpoint - Business Development Companies (BDCs) are often overlooked by investors despite their potential as solid long-term investments, particularly for income-focused investors [1]. Group 1: Investment Perspective - BDCs are perceived as riskier due to their sensitivity to interest rates, yet they can provide substantial returns for long-term investors [1]. - The article emphasizes the importance of BDCs for income-focused investors, suggesting they can be a valuable addition to investment portfolios [1]. Group 2: Author's Background - The author is a Navy veteran with a focus on dividend investing in quality blue-chip stocks, BDCs, and REITs, aiming to supplement retirement income through dividends in the next 5-7 years [2]. - The author aspires to assist lower and middle-class workers in building high-quality, dividend-paying investment portfolios [2].

Core Insights - The current market environment is favorable for high yield income investors, as the overall market remains expensive despite recent volatility [2] - The focus is on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1][2] Investment Strategy - The investment group iREIT®+HOYA Capital specializes in high-yield, dividend growth investment ideas, targeting dividend yields up to 10% [2] - The group provides research on various asset classes including REITs, ETFs, closed-end funds, preferreds, and dividend champions [2] Market Context - Dividends are emphasized as a reliable source of income that cannot be clawed back, contrasting with unrealized capital gains [2] - The service aims to help investors achieve dependable monthly income and portfolio diversification [2]

Core Insights - Capital Southwest Corporation (CSWC) is a business development company focused on providing capital to middle-market companies, with a current trading price of $19.97 and a price target set at $22 by Capital One Financial, indicating a potential upside of approximately 10.17% [1][6] Financial Performance - In Q2 2026, CSWC reported earnings of $0.57 per share, which was below the Zacks Consensus Estimate of $0.58, resulting in a negative surprise of 1.72% [2][6] - The company achieved revenues of $56.95 million, exceeding the Zacks Consensus Estimate by 2.17% and showing an increase from $48.71 million in the same period last year [2] Investment Portfolio - CSWC's total investment portfolio is valued at $1.9 billion, with a credit portfolio of $1.7 billion, primarily consisting of 99% first lien senior secured debt [3][6] - The company committed $241.5 million in new credit investments during the quarter, achieving a weighted average yield on debt investments of 11.5% [3] Income and Dividends - The pre-tax net investment income for the company was recorded at $34 million, equating to $0.61 per weighted average common share [4] - CSWC paid regular monthly dividends of $0.19 per share for July, August, and September 2025, along with a supplemental dividend of $0.06 per share in September, totaling $0.64 per share for the quarter [4] Market Performance - The stock price of CSWC has fluctuated between a low of $19.91 and a high of $20.55 today, with a market capitalization of approximately $1.11 billion and a trading volume of 993,991 shares [5] - Over the past year, the stock reached a high of $23.86 and a low of $17.46, indicating volatility despite the recent earnings miss [5]

Financial Data and Key Metrics Changes - Pre-tax net investment income was $34 million, or $0.61 per share, for the quarter, with total investment income increasing to $56.9 million from $55.9 million in the prior quarter [15][16] - The company increased its undistributed taxable income (UTI) balance to $1.13 per share from $1 per share at the end of the prior quarter [3] - The company's NAV per share at the end of the quarter was $16.62, up from $16.59 in the prior quarter [17] Business Line Data and Key Metrics Changes - The company deployed a total of $166 million in new committed capital, including $162 million in first-lien senior secured debt and $3 million in equity across seven new portfolio companies [7] - The on-balance sheet credit portfolio ended the quarter at $1.7 billion, representing year-over-year growth of 24% from $1.4 billion as of September 2024 [8] - Approximately 93% of the credit portfolio is backed by private equity firms, with 100% of new portfolio company debt originations being first-lien senior secured [9][10] Market Data and Key Metrics Changes - The weighted average spread on new commitments this quarter was approximately 6.5%, which is considered strong in a tight spread deal environment [6] - The credit portfolio had a weighted average yield of 11.5% and a weighted average leverage of 3.5 times EBITDA [11] Company Strategy and Development Direction - The company is focused on monetizing its investment platform to enhance its competitive position and potentially bring in additional fees [25] - There is a strong emphasis on building for growth, with plans to add more originators and support staff to manage increased deal volume [26] - The company aims to maintain a conservative balance sheet with adequate liquidity and covenant cushions [20] Management's Comments on Operating Environment and Future Outlook - Management noted a significant uptick in the size of the pipeline, with expectations for continued strong origination activity [24] - The growth in dividend revenue from existing portfolio companies has been about 10% annually, indicating healthy performance despite some slowing compared to previous periods [28] - Management expressed confidence in the credit quality of the portfolio, with no significant issues observed across industries [30] Other Important Information - The company raised approximately $40 million in gross equity proceeds during the quarter through its equity ATM program [5] - The company has a robust liquidity position with approximately $719 million in cash and undrawn leverage commitments [18] Q&A Session Summary Question: What does the pipeline look like heading into year-end? - Management observed a significant uptick in the pipeline size, expecting continued strong origination activity similar to the previous quarter [24] Question: Can you discuss credit quality and outlook for portfolio companies? - Management reported a 10% annual growth in dividend revenue from existing portfolio companies, indicating healthy performance despite some slowing [28] Question: What are the trends affecting underperforming companies on the watch list? - Management noted that while some companies are facing issues, they are not in dire situations due to support from private equity sponsors [33] Question: How does the company view the risk of prepayments in the portfolio? - Management indicated that the portfolio's granularity mitigates the impact of any single credit, and historical prepayment rates have been around 10%-12% [39] Question: Are there any industries the company is more cautious about now? - Management expressed caution regarding healthcare due to uncertainties in reimbursement, but remains open to opportunities with experienced private equity partners [49]

Investment Portfolio - As of September 30, 2025, the total fair value of the investment portfolio was $1,877.9 million, an increase from $1,785.3 million as of March 31, 2025[313]. - The company had investments in 126 portfolio companies with an aggregate cost of $1,896.5 million as of September 30, 2025, compared to 121 companies with a cost of $1,779.4 million as of March 31, 2025[313]. - Debt investments at fair value bearing a floating rate were $1,648.4 million, representing 96.6% of total debt investments as of September 30, 2025[313]. - The percentage of portfolio at fair value secured by first lien was 89.9% as of September 30, 2025, up from 88.9% as of March 31, 2025[313]. - Investments on non-accrual status represented approximately 1.0% of the total investment portfolio's fair value and 2.6% of its cost as of September 30, 2025[310]. - Investments on non-accrual status represented approximately 1.0% of the total investment portfolio's fair value as of September 30, 2025, down from 1.7% as of March 31, 2025[320]. Financial Performance - Total investment income for the three months ended September 30, 2025 was approximately $56.9 million, a 16.9% increase compared to $48.7 million for the same period in 2024[326]. - Interest income for the three months ended September 30, 2025 totaled $46.2 million, up from $42.1 million in 2024, driven by a 22.2% increase in the average monthly cost basis of debt investments[327]. - Net investment income for the three months ended September 30, 2025 was $32.0 million, a slight increase of 2.6% from $31.2 million in 2024[325]. - Total investment income for the six months ended September 30, 2025, was approximately $112.9 million, a $12.8 million increase, or 12.8%, compared to the same period in 2024[337]. - Net investment income for the six months ended September 30, 2025, increased by $3.8 million, or 6.4%, to $63.9 million, due to a $12.8 million rise in total investment income[342]. - Total net realized gain on investments for the six months ended September 30, 2025, was $10.8 million, compared to a net loss of $9.6 million in the same period of 2024, reflecting a significant turnaround[343][344]. Debt and Interest Expenses - For the three months ended September 30, 2025, total interest expense increased by $3.4 million to $16.0 million, attributed to a $239.3 million increase in average borrowings, despite a decrease in the weighted average interest rate from 5.61% to 5.49%[330]. - For the six months ended September 30, 2025, interest expense increased by $6.3 million to $31.3 million, primarily due to a $217.2 million rise in average borrowings, despite a decrease in the weighted average interest rate from 5.60% to 5.47%[340]. - The weighted average yield on debt investments decreased from 12.9% to 11.5% year-over-year[327]. - Approximately 96.6% of the company's debt investment portfolio bore interest at floating rates as of September 30, 2025[372]. Operational Efficiency - The company’s internally managed structure resulted in a last twelve months (LTM) operating expense ratio of 1.64% as of September 30, 2025, down from 1.74% as of September 30, 2024[305]. - Employee compensation expense for the three months ended September 30, 2025, rose by $0.4 million, or 10.6%, totaling $4.2 million, driven by increased accrued bonuses[331]. - Total general and administrative expenses for the six months ended September 30, 2025, increased by $0.4 million, or 6.6%, totaling $5.9 million, driven by higher legal fees and additional office space costs[341]. Cash and Liquidity - The company experienced a net increase in cash and cash equivalents of $44.2 million for the six months ended September 30, 2025, compared to $15.0 million for the same period in 2024[348][349]. - As of September 30, 2025, the company had $87.4 million in unrestricted cash and cash equivalents and $632.2 million of unused capacity under its Credit Facilities[350]. - The company's asset coverage ratio was 208% as of September 30, 2025, exceeding the required minimum of 150%[347]. - The company raised $82.0 million in gross proceeds from the Equity ATM Program for the six months ended September 30, 2025, compared to $58.9 million for the same period in 2024[361]. - The company had $208.0 million available under the Equity ATM Program as of September 30, 2025[361]. Market and Economic Conditions - The company is closely monitoring the impact of geopolitical instability and economic conditions on its portfolio companies and investment activities[316]. - The company is subject to market risks including interest rate volatility, which could materially affect net investment income[369]. - The company’s interest expenses are affected by changes in the published SOFR rate in connection with its Credit Facilities[370]. - A hypothetical 200 basis point decrease in interest rates could result in a decrease of $31.9 million in net investment income[373]. - The Federal Reserve decreased interest rates by 0.25% in September and October 2025, lowering the benchmark lending rate to a range between 3.75% and 4.00%[371]. Investment Commitments and Obligations - As of September 30, 2025, the company had approximately $334.1 million in currently unfunded commitments, up from $197.4 million as of March 31, 2025[364]. - The company had total contractual obligations of $1,298.2 million, with $271.9 million due in less than one year and $732.8 million due in 3-5 years[366]. - On October 13, 2025, the company redeemed $150.0 million in October 2026 Notes and $71.9 million in August 2028 Notes, recognizing a realized loss of approximately $2.2 million[368].

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