Core Viewpoint - Business Development Companies (BDCs) like Capital Southwest (CSWC) have performed well in a high interest rate environment, with CSWC showing a total return of approximately 125% over the last five years and a distribution yield of 8.7% [1][12]. Financial Performance - CSWC's net investment income (NII) per share has increased as interest rates rose, with NII per share reaching $0.38 in Q1 2021 and growing consistently thereafter [5]. - The most recent earnings call indicated a non-accrual rate of 2.3% of fair value, slightly up from 2.2%, suggesting some pressure from high interest rates on portfolio companies [6]. - CSWC has committed $154 million to new credit investments with a weighted average yield of 13.3% over the last quarter [6]. Investment Strategy - CSWC focuses on lower middle market companies, primarily investing in first lien debt, which constitutes 97% of its portfolio, providing stability and lower risk of capital loss [13][14]. - The portfolio is heavily weighted towards floating rate investments (97.4%), allowing CSWC to benefit from rising interest rates [14]. Market Position - CSWC currently trades at a premium to net asset value (NAV) of about 56.7%, significantly higher than the average premium of 35% over the past three years [7]. - The company has consistently issued supplemental dividends and increased base distributions, with a compound annual growth rate (CAGR) of 9.08% over the last five years [24]. Economic Outlook - The Federal Reserve's interest rate decisions, particularly in the context of the upcoming US presidential elections, may lead to potential rate cuts, which could impact CSWC's pricing and investment income [9][20]. - Future interest rate cuts are expected to lower NII, presenting a more attractive entry point for new investors [21][30].

DALLAS, July 17, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation ("Capital Southwest") (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, is pleased to announce its preliminary operating results for the first quarter of its 2025 fiscal year (quarter ended June 30, 2024) and its first quarter 2025 earnings release and conference call schedule. Capital Southwest's prelimi ...

Overview Figure 1: Seeking Alpha Portfolio of Assets Its equity investments over total assets are 24.9%, one of the highest in the industry. It invests in diverse industries, from industrials to consumer staples and technolog It also invests in several equity tools, like common and preferred equity and warrants, reinforcing the company's risky nature. It gets a yield on its debt investments of 13.5%, one of the largest in the industry, slightly lower than Trinity Capital, with 14.2%. As shown in Figure 2, I ...

Core Viewpoint - High-yield dividend stocks are currently considered some of the best investment options due to high valuations in growth and tech stocks, suggesting a cautious approach to new positions in those areas [1][2]. Group 1: High-Yield Dividend Stocks - High-yield dividend stocks allow for reinvestment of yields over decades, leading to significant wealth accumulation through compounding [2]. - Investing $100,000 in a selected group of dividend stocks could potentially yield an additional $12,000 annually if trends continue [3]. Group 2: Golub Capital BDC (GBDC) - GBDC reported a record adjusted net investment income per share of 51 cents, a 21% increase from the previous year, resulting in a 13.5% annual return for shareholders [5]. - The upcoming merger with Golub Capital BDC 3 is expected to reduce management fees, establishing a new fee structure standard [6]. - GBDC currently offers a yield of approximately 9.54%, making it attractive for income-focused investors [7]. Group 3: Trinity Capital (TRIN) - TRIN reported $243 million in gross funding, achieving a 38% year-over-year growth in assets under management to $1.6 billion [11]. - The company increased its quarterly dividend to 51 cents per share, marking the 13th consecutive increase, with a current yield exceeding 13.6% [12]. Group 4: CTO Realty Growth (CTO) - CTO signed over 100,000 square feet of new leases at an average rent of $27.12 per square foot, indicating strong business performance [15]. - The company has a nearly 93% occupancy rate and recently raised $33 million through Series A preferred stock to pay off floating-rate debt [17]. - CTO's dividend yield is over 8.5%, although its history of consistent dividend payments is limited [17]. Group 5: Capital Southwest (CSWC) - CSWC grew its investment portfolio by 22% to $1.5 billion and increased its regular dividend by 10% to $2.24 per share [20][21]. - The company maintains a 121% regular dividend coverage ratio, indicating sustainability of dividend payments [21]. - CSWC's current dividend yield is 9.5%, with expectations for potential special dividends due to undistributed taxable income [22]. Group 6: Blue Owl Capital Corporation (OBDC) - OBDC reported net investment income of 47 cents per share, achieving a 12.1% return on equity and increasing its net asset value to $15.47 per share [24]. - The company declared a total dividend yield of 10.12%, with strong earnings supporting the sustainability of these payments [26]. Group 7: Hercules Capital (HTGC) - HTGC achieved record origination and funding numbers, with $956 million in gross commitments, marking its best funding quarter [29]. - The company maintains a conservative leverage ratio of 93.6% while generating a robust 14.9% portfolio yield [30]. - HTGC's dividend yield is attractive, with consistent payouts and a strong balance sheet [32]. Group 8: MPLX LP (MPLX) - MPLX reported an 8% increase in adjusted EBITDA to $1.6 billion, translating to $1.4 billion in cash available for distribution [34]. - The company returned $951 million to unitholders during the quarter, with a current dividend yield of 8.3% [35].

Core Insights - The article emphasizes the importance of the payback period as a measure of investment performance, alongside total returns and capital appreciation [1][2] Company Analysis: Capital Southwest (CSWC) - CSWC offers an attractive yield of 8.7% and is characterized as an internally managed business development company (BDC) with a diversified portfolio [3] - The investment portfolio is heavily weighted towards first lien secured debt investments, comprising 89% of the total portfolio, with significant exposure to defensive industries such as Healthcare and Consumer Products [4] - CSWC's portfolio value grew by $0.1 billion to $1.5 billion in fiscal Q4 '24, reflecting its ability to raise equity capital at a premium to net asset value [5] - The weighted average yield on debt investments is 13.3%, consistent with the previous year, while NAV per share increased by $0.40 year-over-year to $16.77 [6] - CSWC generated net investment income (NII) per share of 0.68 in fiscal Q4 '24, resulting in a 119% dividend coverage, and has paid two special dividends of $0.06 in addition to the regular quarterly dividend of $0.57 [7] - The company maintains a low-cost structure with an operating leverage ratio of 1.7%, the second-lowest in the BDC segment [8] - CSWC has a strong balance sheet with a regulatory debt-to-equity ratio of 0.82x, well below the statutory limit of 2.0x, and is in the process of obtaining a second SBIC license to enhance lending capacity [9] - Despite a current price of $26.50 and a Price-to-NAV of 1.58x, CSWC's valuation is competitive compared to peers [10] - The company is valued based on P/E rather than P/NAV, with a P/E of 9.8x, and scores a 4.05 on the Quant Rating scale, indicating strong valuation and profitability [11][12] Company Analysis: Brookfield Infrastructure Partners (BIP) - BIP offers a yield of 5.3% and invests in mission-critical assets across various sectors, including energy pipelines and data centers, aiming for stable cash flows [13] - The company has achieved a compound annual growth rate in shareholder distribution of 8% over the past decade, with a 67% FFO payout ratio ensuring distribution protection [14] - FFO per share grew by 8% year-over-year to $0.78 in Q1 2024, driven by strong transportation volumes and higher contracted revenues [15] - Management targets total annual returns of 12-15% on invested capital, focusing on growth in transmission and data centers, with plans for incremental processing capacity in Canadian natural gas [16] - BIP maintains a strong BBB+ rated balance sheet with $2.0 billion in total liquidity and 90% of its debt at fixed rates [17] - The current price of $30.64 reflects an appealing Price-to-CF ratio of 3.2x, at the low end of its 3-year range, with management projecting 5-9% annual distribution growth [18][19]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2024 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 814-00061 CAPITAL SOUTHWEST CORPORATION (Exact na ...

Capital Southwest (CSWC) could be a solid choice for investors given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices. The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate. Since a changing earn ...

Capital Southwest (NASDAQ:CSWC) Q4 2024 Earnings Conference Call May 15, 2024 11:00 AM ET Corporate Participants Chris Rehberger - Vice President, Finance Bowen Diehl - President and Chief Executive Officer Michael Sarner - Chief Financial Officer Conference Call Participants Mickey Schleien - Ladenburg Vilas Abraham - UBS Bryce Rowe - B. Riley Erik Zwick - Hovde Group Sean-Paul Adams - Raymond James Operator Thank you for joining today's Capital Southwest Fourth Quarter and Fiscal Year 2024 Earnings Call. ...

| --- | --- | |------------------------------------------------------------------------------------------------|-------| | | | | | | | Q4 2024 Earnings Presentation | | | May 15, 2024 | | | 8333 Douglas Avenue, Suite 1100 \| Dallas, Texas 75225 \| 214.238.5700 \| capitalsouthwest.com | | Important Notices • These materials and the presentations of which they are a part, and the summaries contained herein, do not purport to be complete and no obligation to update or otherwise revise such information is being ...

Financial Performance - Pre-tax net investment income for the quarter ended March 31, 2024, was $0.68 per share, exceeding the regular dividend of $0.57 per share and supplemental dividend of $0.06 per share[6] - Total investment income for the quarter ended March 31, 2024, was $178.135 million, a 49.3% increase from $119.300 million in the same quarter of 2023[21] - Net investment income for the quarter was $110.005 million, up 60.0% from $68.711 million year-over-year[21] - Total pre-tax net investment income for the year was $110.9 million, up from $69.0 million in the prior year, representing a 60.3% increase[40] - The net increase in net assets from operations of $83.389 million, significantly higher than $33.093 million in the prior year[21] Investment Portfolio - Total investment portfolio reached $1.5 billion, with $154.6 million in new committed credit investments and $2.9 million in new equity co-investments during the quarter[3] - The total investment portfolio increased by $270.2 million, from $1.2 billion to $1.5 billion, reflecting a growth of 22.4% during the year[51] - The credit portfolio had a weighted average yield on debt investments of 13.3%[1] - Current non-accruals amounted to $33.8 million, representing 2.3% of the total investment portfolio[4] - The company originated $157.5 million in new commitments during the quarter, consisting of investments in six new portfolio companies totaling $126.3 million[52] Dividends - Total dividends declared for the June 30, 2024 quarter are $0.63 per share, consisting of a regular dividend of $0.57 and a supplemental dividend of $0.06[6] - Regular dividend declared for the quarter ended June 30, 2024, is $0.57 per share, with a supplemental dividend of $0.06 per share[24] - The company declared a total dividend of $0.63 per share for the quarter ended June 30, 2024, which includes a Regular Dividend of $0.57 and a Supplemental Dividend of $0.06[45] Assets and Liabilities - The company's net asset value (NAV) per share increased to $16.77 as of March 31, 2024, up from $16.37 a year earlier[9] - Total assets as of March 31, 2024, were $1.556 billion, an increase from $1.258 billion in the previous year[29] - Total liabilities increased to $801.082 million from $667.276 million year-over-year[29] - Cash and cash equivalents stood at $32.3 million, with total net assets of $755.7 million[5] - As of March 31, 2024, Capital Southwest had approximately $32.3 million in unrestricted cash and money market balances and a total debt outstanding of $265.0 million on the Corporate Credit Facility[44] Operating Expenses - Total operating expenses increased to $67.186 million, compared to $50.260 million in the same quarter of the previous year, reflecting a 33.7% rise[21] - Interest expense for the year ended March 31, 2024, was $43.1 million, compared to $28.9 million in the prior year, marking a 49.5% increase[62] Equity and Financing - The company raised $184.2 million through the Equity ATM Program, selling 8,733,315 shares at a weighted-average price of $21.09 per share[13] - The company has $121.1 million available under the Equity ATM Program as of March 31, 2024[13] - The company has an "at-the-market" offering program with an aggregate offering price of up to $650 million[22] - The company sold 2,069,620 shares of its common stock under the Equity ATM Program during the quarter[22] Quarterly Comparisons - For the quarter ended March 31, 2024, total investment income was $46.4 million, down from $48.6 million in the prior quarter[55] - The net increase in net assets resulting from operations for the quarter was $13.5 million, down from $23.5 million in the prior quarter[58] - The company's NAV at March 31, 2024, remained flat at $16.77 per share compared to the prior quarter[59]