Stellus Capital (SCM) shares rallied 7.1% in the last trading session to close at $12.52. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 15.4% loss over the past four weeks.Stellus Capital stock surged, driven by a massive jump in the broad markets. The jump was fueled by President Donald Trump’s announcement of a 90-day tariff pause for the non-retaliating nations. This cheered the investors, driving the SC ...

Group 1 - The Company declared a monthly dividend of $0.1333 for April, May, and June 2025, totaling $0.40 per share for the second quarter [1] - The regular dividend will be paid to shareholders of record in May, June, and July 2025 [1] - The ex-dividend dates are set for April 30, May 30, and June 30, 2025, with payment dates on May 15, June 13, and July 15, 2025 [2] Group 2 - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [3] - The Company's investment objective is to maximize total return to stockholders through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5.0 million and $50.0 million [3] - The Company focuses on first lien loans, including unitranche loans, often with corresponding equity investments [3]

Core Viewpoint - Stellus Capital Investment Corporation has announced a public offering of $75 million in 7.25% notes due 2030, aimed at repaying part of its outstanding credit facility and potentially investing in lower middle-market companies [1][3]. Group 1: Offering Details - The public offering consists of $75 million aggregate principal amount of 7.25% notes, maturing on April 1, 2030, with interest payable semi-annually starting October 1, 2025 [1]. - The notes may be redeemed at the Company's option at par plus a "make-whole" premium [1]. - The offering is managed by Raymond James & Associates, Inc. as the lead book-running manager, with Goldman Sachs & Co. LLC and Keefe, Bruyette & Woods, Inc. as passive book-runners [2]. Group 2: Use of Proceeds - The net proceeds from the offering will be used to repay a portion of the $236.4 million outstanding under the Company's credit facility [3]. - The Company may re-borrow under its credit facility to invest in lower middle-market companies and for general corporate purposes [3]. Group 3: Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [7]. - The Company's investment objective is to maximize total return through current income and capital appreciation by investing primarily in private lower middle-market companies with EBITDA between $5 million and $50 million [7].

Financial Data and Key Metrics Changes - In Q4 2024, the company generated GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, excluding estimated excise taxes [8] - Net asset value per share decreased by $0.09 during the quarter due to net unrealized depreciation on the investment portfolio and reduction of spillover income, offset by net realized gains primarily related to one equity investment [9] - The investment portfolio at fair value increased to $953.5 million across 105 portfolio companies, up from $908.7 million across 99 companies as of September 30, 2024 [10] Business Line Data and Key Metrics Changes - The company invested $76.5 million in nine new and portfolio companies during Q4 2024 and had $33 million in other investment activity, all at par [10] - Three full repayments totaling $46.9 million and $15.6 million of other repayments were received, both at par [11] - 98% of loans were secured and 95% were priced at floating rates, with an average loan per company of $9.5 million [11][12] Market Data and Key Metrics Changes - The company’s portfolio includes loans to seven portfolio companies on nonaccrual, comprising 5.4% of the fair value of the total loan portfolio [13] - 24% of the portfolio is rated a one or ahead of plan, while 21% is marked category three or below plan, indicating some companies are not meeting expectations [13] Company Strategy and Development Direction - The company aims to maintain a portfolio of $1 billion, having funded an additional $47 million in the first quarter of 2025 [14] - The equity co-invest business includes investments across 92 companies with a cost basis of $59 million, with expectations of meaningful uplift over time [16] - The company declared a dividend of $0.40 per share for Q1 2025, expected to continue into the second quarter and throughout the year based on spillover earnings [17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding leverage levels and potential credit risks due to uncertainties created by government actions [24][25] - The company anticipates that the first quarter EPS will likely not fully cover the dividend, but spillover earnings from previous years will help [29][30] - Management noted a decrease in investment yields due to tightening spreads and some additional non-accruals, but overall asset quality remains on plan [34] Other Important Information - The company had $45 million of spillover at the end of Q4 2024, which will support dividends in 2025 [52] - The company is in the process of obtaining a third SBA lending license after prepaying a debenture payment of approximately $16 million [38] Q&A Session Summary Question: Thoughts on potential tariff impacts and credit quality changes - Management is operating at lower leverage levels than usual and is cautious about the uncertainty created by government actions [24][25] Question: Will first quarter EPS cover the dividend? - EPS is expected to be close but probably not fully cover the dividend, with substantial earnings from the past helping to cover it [29][30] Question: What drove the decrease in investment yields? - Decrease in spreads from sixes to fives and some impact from additional non-accruals were noted [34] Question: Thoughts on increasing leverage - Management is targeting a one-to-one leverage ratio but remains cautious about increasing leverage in the current environment [36] Question: Will the company re-up for more SBA lending capacity? - Yes, the company is moving forward with obtaining a third license for SBA lending [38] Question: Analysis of portfolio exposure to tariffs - Management estimates that up to 10% of the portfolio could be impacted by tariffs, but it is not expected to be material at this time [57][58] Question: Any additional markup from realized gains this quarter? - There was a few million dollars in additional markup from one equity position that continued to grow [60]

Core Insights - Stellus Capital (SCM) reported quarterly earnings of $0.37 per share, missing the Zacks Consensus Estimate of $0.38 per share, and down from $0.50 per share a year ago, representing an earnings surprise of -2.63% [1] - The company posted revenues of $25.62 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.14% and down from $28.02 million year-over-year [2] - Stellus Capital shares have increased by approximately 12.7% since the beginning of the year, contrasting with a -0.5% decline in the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.36 on revenues of $25.67 million, and for the current fiscal year, it is $1.45 on revenues of $102.14 million [7] - The estimate revisions trend for Stellus Capital is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - SBIC & Commercial Industry, to which Stellus Capital belongs, is currently in the top 33% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - WhiteHorse Finance (WHF), another company in the same industry, is expected to report quarterly earnings of $0.40 per share, reflecting a year-over-year decline of 13% [9]

Core Insights - Stellus Capital Investment Corporation reported solid operating results for the fourth fiscal quarter and year ended December 31, 2024, with U.S. GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share [2][9] - The company funded $109 million in investments during the quarter and received $65 million in repayments, resulting in a total portfolio value of $953 million at fair value [2][5] - Since inception, investors have received a total of $288 million in aggregate distributions, equivalent to $16.69 per share [2] Financial Highlights - For the three months ended December 31, 2024, net investment income was $9.64 million, or $0.35 per share, compared to $11.91 million, or $0.49 per share for the same period in 2023 [3][9] - Core net investment income for the same period was $10.15 million, or $0.37 per share, down from $12.16 million, or $0.50 per share in 2023 [3][9] - Total realized income for the quarter was $15.57 million, with distributions totaling $10.90 million, or $0.40 per share [3][14] Portfolio Activity - As of December 31, 2024, investments at fair value increased to $953.5 million from $874.5 million a year earlier [5] - The company had 105 portfolio company investments, up from 93 in the previous year [5] - New investments during the quarter totaled $108.5 million, while repayments amounted to $64.5 million [5] Liquidity and Capital Resources - The company's credit facility allows for borrowings up to $315 million, with an accordion feature for potential expansion to $350 million [12] - As of December 31, 2024, outstanding borrowings under the credit facility were $175.4 million, compared to $160.1 million a year earlier [13] Distributions - The company declared aggregate distributions of $0.40 per share for both the three months ended December 31, 2024, and 2023, totaling $10.9 million and $9.6 million, respectively [14] - Approximately $0.5 million of the dividends declared in 2024 are expected to be characterized as long-term capital gains [14] Recent Portfolio Activity - The company made several new investments and add-on investments in various sectors, including healthcare, cybersecurity, and digital marketing, totaling millions in investment amounts [15][16][18][19]

Investment Portfolio - As of December 31, 2024, the company had $953.5 million invested in 105 companies, with approximately 90% in first lien debt[419]. - The investment portfolio composition included 1% second lien debt, 1% unsecured debt, and 8% equity investments at fair value[419]. - The total investments at fair value as of December 31, 2024, were $953.5 million, compared to $874.5 million for the same period in 2023, reflecting a growth of approximately 9%[420]. - The geographical concentration of investments showed Texas and California as the top states, accounting for 16.15% and 16.00% of total investments at fair value, respectively[422]. - The investment strategy focuses on lower middle-market companies with EBITDA between $5 million and $50 million[418]. - The portfolio included unitranche investments, which accounted for 2% of the total portfolio at fair value as of December 31, 2024[419]. - The overall investment strategy focuses on sectors such as media, healthcare, and environmental industries, indicating a diversified portfolio approach[548]. - The overall investment portfolio reflects a diverse range of industries, including consumer goods, energy, aerospace, and environmental services[594]. - The company continues to focus on strategic investments to enhance its portfolio and drive future growth[595]. Financial Performance - The total investment income for the year ended December 31, 2024, was $104.7 million, a slight decrease from $105.8 million in 2023[444]. - Net investment income for the year ended December 31, 2024 was $41.9 million, or $1.64 per common share, compared to $42.2 million, or $1.92 per common share in 2023[450]. - Net realized losses on investments for the year ended December 31, 2024 totaled ($15.7) million, with proceeds from repayments of investments amounting to $151.8 million[454]. - The net change in unrealized appreciation for the year ended December 31, 2024 was $19.6 million, a significant increase from $2.8 million in 2023[456]. - The net increase in net assets resulting from operations for the year ended December 31, 2024 was $45.8 million, or $1.79 per common share, compared to $17.5 million, or $0.80 per common share in 2023[462]. - Total operating expenses were $64.6 million, an increase from $63.9 million in 2023 and $46.5 million in 2022[449]. - The company recognized $2.5 million of non-recurring income in 2024, related to early repayments and amendments to specific loan positions[444]. Cash and Liquidity - The company had cash and cash equivalents of $20.1 million as of December 31, 2024, down from $26.1 million in 2023[432]. - Cash flows from operating activities used net cash of $28.6 million for the year ended December 31, 2024, primarily for portfolio investments[465]. - The net decrease in cash and cash equivalents for the year was $(6,067,147) in 2024, compared to $(21,917,588) in 2023[541]. - The company had $45.4 million of undistributed taxable income as of December 31, 2024, to be carried forward for distributions in 2025[496]. Debt and Financing - The company had unfunded commitments of $41.3 million as of December 31, 2024, up from $37.0 million in 2023, indicating an increase in potential future investments[421]. - The Credit Facility allows borrowings up to a maximum of $315.0 million, with an accordion feature to increase commitments to $350.0 million[472]. - As of December 31, 2024, the outstanding balance under the Credit Facility was $175.4 million, up from $160.1 million in 2023[475]. - Interest expense for the Credit Facility was $13.6 million in 2024, compared to $14.7 million in 2023, with a weighted average interest rate of 8.3%[476]. - The company has a total of $1,325,032 in revolver commitments for ArborWorks, LLC, maturing on November 6, 2028, with a 0.00% interest rate[574]. - Total unfunded debt commitments amount to $40,989,533[576]. Asset Quality and Coverage - The asset coverage ratio as of December 31, 2024, was 234%, which is above the regulatory requirement of 150%[415]. - The asset quality ratings showed that 24% of the portfolio was in Investment Category 1 as of December 31, 2024, consistent with the previous year[437]. - As of December 31, 2024, the investment portfolio at fair value represented approximately 97.2% of total assets[504]. - The company has maintained compliance with RIC requirements as of December 31, 2024, allowing it to avoid U.S. federal income taxes on distributed income[413]. Shareholder Distributions - The company intends to distribute between 90% and 100% of its taxable income to satisfy RIC requirements under Subchapter M of the Code[469]. - The company declared a regular monthly distribution of $0.1333 per share for January, February, and March 2025[511]. - Stockholder distributions paid were $37,560,442 in 2024, compared to $35,527,480 in 2023[541]. - Distributions Per Share remained stable at $1.61 for both 2024 and 2023, up from $1.30 in 2022[536]. Changes in Investments - The company made $221.2 million in investments across 21 new portfolio companies and 29 existing portfolio companies during the year ended December 31, 2024, compared to $190.9 million in investments in 2023[433][434]. - Loans to seven portfolio companies were on non-accrual status as of December 31, 2024, representing approximately 8.3% of the loan portfolio at cost, an increase from 4.2% in 2023[439]. - The company did not engage in interest rate hedging activities for the years ended December 31, 2024, and 2023[515]. Changes in Assets and Liabilities - As of December 31, 2024, total assets amounted to $980.90 million, an increase from $908.09 million as of December 31, 2023, representing a growth of approximately 7.99%[534]. - Total liabilities increased to $610.98 million from $588.15 million, which is an increase of about 3.09%[534]. - Net assets grew to $369.92 million from $319.94 million, indicating a significant increase of approximately 15.61%[534]. - The net asset value per share increased to $13.46 from $13.26, reflecting a growth of about 1.51%[534].

Core Viewpoint - Stellus Capital Investment Corporation is set to release its financial results for Q4 and the full year of 2024 on March 4, 2025, after market close [1] Financial Results Announcement - The financial results will be discussed in a conference call on March 5, 2025, at 10:00 AM Central Time, led by the CEO and CFO [2] - A replay of the conference call will be available starting two hours after the call and can be accessed until March 19, 2025 [3] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [4] - The company's investment objective focuses on maximizing total return through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5.0 million and $50.0 million [4] - Investment strategies include first lien, second lien, unitranche, and mezzanine debt financing, along with corresponding equity investments [4]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines high-quality dividend stocks with other investment vehicles such as Business Development Companies, REITs, and Closed End Funds to enhance income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on creating a balanced portfolio that captures both growth and income, aiming for a total return that aligns with the performance of the S&P 500 [1]. - The author highlights the effectiveness of utilizing classic dividend growth stocks as a foundational element in the investment strategy [1]. Personal Experience - The author shares their journey from sharing investment knowledge on social media to expanding insights through written articles, indicating a commitment to educating others about investment opportunities [1].

Dividend Announcement - Stellus Capital Investment Corporation declared a monthly dividend of $0 1333 per share for January, February, and March 2025, totaling $0 40 per share for the first quarter [1] - The dividends will be paid to shareholders of record in February, March, and April 2025 [1] - The ex-dividend dates are January 31, 2025, February 28, 2025, and March 31, 2025, with payment dates on February 14, 2025, March 14, 2025, and April 15, 2025, respectively [2] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [3] - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5 0 million and $50 0 million [3] - The company focuses on first lien, second lien, unitranche, and mezzanine debt financing, as well as corresponding equity investments [3] - Investment activities are managed by Stellus Capital Management [3]