Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) has seen a price decline of nearly 10% since the last coverage, prompting a reassessment of its investment potential, particularly in light of its high dividend yield and changing credit quality [1][3][29] Financial Performance - The current dividend yield for HRZN is 11.4%, with monthly distributions appealing to income-focused investors, especially those nearing retirement [3][21] - HRZN reported a net investment income (NII) per share of 26.1 million, indicating a coverage rate of 115% for its dividend [9][21] - The net asset value (NAV) per share has decreased from 9.64, attributed to a reduction in portfolio companies and an increase in non-accruals [12][29] Portfolio Composition - HRZN's portfolio consists of 33.5 million in Q1, which may contribute to future interest income and NAV growth [12] Interest Rate Environment - HRZN has capitalized on the higher interest rate environment by focusing on floating rate debt investments, which can increase income as rates rise [7][29] - However, the rising interest rates have also strained portfolio companies, leading to a decline in credit quality, with investments rated at the lowest quality (1) increasing from 4.1% to 7.6% [15][16] Valuation and Market Position - The share price has decreased from around 11.50 range, currently trading at a premium to NAV of nearly 20%, which is more attractive compared to previous premiums [26][29] - The average Wall Street price target for HRZN is 15 and the lowest at $8.75 [28] Investment Outlook - Despite the drop in credit quality, HRZN continues to support its monthly distributions, and the current price presents a more favorable entry point for potential investors [29] - Current shareholders are advised to hold, while new investors should exercise caution due to the increased vulnerability of HRZN's investments in a prolonged high-interest rate environment [29]
Horizon Technology Finance: Attractive Price Entry Offset By Drop In Portfolio Quality