For you non-lawyers, let me explain why slick (aka “psec_holders_are_brilliant”) is a liar. The “United States Code” (“U.S.C.”) contains the codification of the US federal statutes. The U.S.C. is broken down into “Titles” - 54 titles in all. These titles are then subdivided into Subtitles, Chapters, Subchapters, Parts, Subparts, Sections, Subsections, Paragraphs, Subparagraphs, Clauses, Subclauses, Items, and finally Subitems. For example, Title 18 codifies the criminal statues (including crimes and criminal procedure), while Title 26 codifies the “Internal Revenue Code” (“IRC”).
Contrary to what slick claims, the IRC does NOT contain a “Title 849” or any other “Title.” Also, if slick meant by the “Code” the “United States Code,” he is also wrong because there are only 54 “titles.” There is NO “Title 849 "Amended Statutory Secondary Withholding Income Premium Exemption" allowed under the Code.” You readers CANNOT TRUST anything slick or his many aliases post on this message board.
Once again, I do not use aliases. BTW why do you still hold 10,000 shares, waiting for a special dividend? What a fool you are, riding this stock down from 11 to ZIP while waiting for special dividends, and holding earlier in the misplaced belief that the div was sustainable at .11. You are not qualified to post anything on a message board, all you do is lose........
I cant figure out what china has to do with our stock market....
Some folks believe that a HOLD rating from a brokerages really translates to a sell...and a buy rating a hold and a strong buy a buy....I am a holder
Folks, skick (aka “psec_holders_are_brilliant”) is just making this stuff up. There is no “Title 849 "Amended Statutory Secondary Withholding Income Premium Exemption" allowed under the Code.” What a fraud!!!!
I always thought of myself as a details kind of guy. I think I've been cured of that! Jim, you may or may not have a point, we'll never know because your commentary is unreadable. It looks like you're being paid by the word. Maybe if you put the bibliography at the end or something.
Snott Brown never, EVER, had a clue about ANYTHING pertaining to PSEC. Snott Brown is JimCooper (aka help_I_am_incoherent) dressed up in drag.
Seems to me that you posted the same garbage when for 2 months you posted rants that the div would not be cut, but it was which was obviously going to happen and apparent to all rational people at the time. In fact, you have not been right about anything with psec in the past, that is why you have, according to you, 10,000 shares. You are just a loser who twists things to suit his own agenda. Psec will be lucky to cover the divs for this quarter, and you are posting junk about a special div. Give me a break. Every time you try to slander me by attributing others posts to me I WILL REPLY, and expose you for what you are.......
coop (aka help_I_am_incoherent), I have reviewed your numbers and you are INCORRECT. You have neglected to factor in the Title 849 "Amended Statutory Secondary Withholding Income Premium Exemption" allowed under the Code. Assuming it is your position that the evil JB will distribute only the minimum amount of accrued excess TI as required under the code, he would certainly avail himself to the 849 exemption and, under that calc, the number is just about a dime. I say a dime exactly as they will round it up. We shall see - and we shall also see whether you should be totally ignored forever, even your first couple of lines, since everyone already ignores the last 200 lines of your posts.
Prospect Capital has earned a consensus rating of “Hold” from the ten brokerages that are currently covering the company, Six equities research analysts have rated the stock with a hold recommendation and four have assigned a buy recommendation to the company. The average 12-month target price among brokers that have issued a report on the stock in the last year is $9.93.
Prospect Capital traded down 1.78% during mid-day trading on Monday, hitting $7.18. 2,729,953 shares of the company’s stock traded hands. Prospect Capital has a 1-year low of $7.15 and a 1-year high of $11.05. The stock has a 50-day moving average of $7.48 and a 200-day moving average of $8.17.
Prospect Capital last issued its quarterly earnings data on Wednesday, May 6th. The company reported $0.24 earnings per share for the quarter, missing the analysts’ consensus estimate of $0.26 by $0.02. The company had revenue of $185.00 million for the quarter, compared to the consensus estimate of $201.50 million. During the same quarter last year, the company posted $0.31 earnings per share. Prospect Capital’s revenue was up 18.3% compared to the same quarter last year. On average, analysts predict that Prospect Capital will post $1.03 earnings per share for the current fiscal year.
The company also recently declared a monthly dividend, which will be paid on Thursday, August 20th. Stockholders of record on Friday, July 31st will be given a dividend of $0.0833 per share. This represents a $1.00 dividend on an annualized basis and a yield of 13.93%. The ex-dividend date of this dividend is Wednesday, July 29th.
PSEC has been the subject of a number of recent research reports. Analysts at Zacks upgraded shares of Prospect Capital from a “sell” rating to a “hold” rating in a research note on Wednesday, July 8th. Analysts at BMO Capital Markets initiated coverage on shares of Prospect Capital in a research note on Wednesday, July 1st. They set a “hold” rating on the stock. Analysts at Cantor Fitzgerald initiated coverage on shares of Prospect Capital in a research note on Tuesday, June 30th. They set a “hold” rating and a $8.00 price target on the stock. Analysts at MLV & Co. reiterated a “buy” rating and set a $9.00 price target (down previously from $10.50) on shares of Prospect Capital in a research note on Sunday, May 10th. Finally, analysts at Barclays lowered their price target on shares of Prospect Capital from $11.00 to $10.00 and set an “equal weight” rating on the stock in a research note on Friday, May 8th.
In other Prospect Capital news, CEO John F. Barry purchased 140,000 shares of the stock in a transaction that occurred on Wednesday, June 10th. The shares were purchased at an average cost of $7.32 per share, with a total value of $1,024,800.00. The acquisition was disclosed in a legal filing with the SEC. Also, COO M Grier Eliasek acquired 20,000 shares of the company’s stock in a transaction that occurred on Tuesday, June 9th. The shares were purchased at an average price of $7.23 per share, with a total value of $144,600.00. Prospect Capital Corporation is a financial services company that primarily lends to and invests in middle market privately-held companies. The Company is a closed-end investment company which invests primarily in first and second lien secured loans and unsecured debt, senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company is a non-diversified company and also focuses on making investments in private companies. The Company’s activities include; lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending.
Sentiment: Strong Buy
Psec_holders_are_brilliant: “Please repost your calcs. i believe there may be a mistake and would like to examine them.”
At the request of slick (aka “psec_holders_are_brilliant”), I’m reposting my calculations for the special dividend. MY MESSAGE WITH CALCULATIONS AND REFERENCED SOURCES FOLLOWS:
To calculate the MINIMUM amount per share of the CASH special dividend, I will (1) quote Prospect’s statements about the applicable tax rules, (2) calculate the “Taxable Income” (“TI”) (total dollars) Prospect earned and will be earning during Prospect’s 2015 taxable year (ending 31 August 2015), (3) calculate the 2015 taxable year monthly dividends (total dollars) already paid and to be paid, (4) calculate the 90%-of-TI amount Prospect must distribute to shareholders to maintain its tax status as a Regulated Investment Company (“RIC”), and (5) calculate the 98%-of-TI amount Prospect would have to distribute to shareholders to avoid the 4% excise tax.
TAX RULES DRIVING DISTRIBUTIONS
The tax rules governing distributions to shareholders are provided on page 153 of the 6 May 2015 10-Q (“Q3 10-Q”), as follows:
“We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Code applicable to regulated investment companies. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.”
“If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. For the calendar year ended December 31, 2014, we did not incur an excise tax expense because our distributions exceeded our annual taxable income. As of March 31, 2015, we had a deposit with the IRS of $1,218 for excise taxes as we had made excise tax payments in excess of our expected excise tax liability through March 31, 2015.”
“If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.”
So, failure to distribute 90% of its TI would be catastrophic for Prospect and its shareholders.
TAXABLE INCOME FOR 2015 TAXABLE YEAR
TI for the 2015 taxable year consists of “carryover” (also known as “spillover”) TI from the 2014 taxable year carried over to the 2015 taxable year plus TI generated during Q1FY2015 (beginning 1 July 2014), Q2FY2015, Q3FY2015, and Q4FY2015. Please note that the effort to generate income in July 2014 and August 2014 (technically in the 2014 taxable year) does not get recorded until 30 September 2014, which falls into the 2015 taxable year. The corollary is that the effort to generate income in July 2015 and August 2015 (technically in the 2015 taxable year) does not get recorded until 30 September 2015, which falls into the 2016 taxable year.
Page 64 of the 6 November 2014 10-Q (“Q1 10-Q”) reported that $71,797,000 TI was carried over from the 2014 taxable year to the 2015 taxable year.
Contrary to the claims by other posters, that $71,797,000 TI carryover was NOT part of the TI generated during Q1FY2015, as demonstrated by the first table, entitled “GAAP Net Investment Income to Taxable Income” and displayed in the 6 November 2015 press release (“PR”).
Page 67 of the 4 February 2015 10-Q (“Q2 10-Q”) reported that the carryover is $50,073,000.
Page 69 of the Q3 10-Q reported the carryover had declined some more to $49,471,000.
That’s a huge discrepancy of $21,724,000 (=$71,797,000-$50,073,000) over 3 months and then another $602,000 decrease 3 months after that. What’s going on here? CFO Brian Oswald (“Oswald”) gives investors the answer during the 5 February 2015 earnings conference call (“CC”), which was recorded in the Thomson-Reuters transcript posted on Prospect’s website under “SEC filings” by date. On page 8 of that transcript, Christopher Knowland (“Knowland”) (stock analyst for MLV & Company) asked, the following:
“Yeah, hi, thanks for taking my questions. What's the driver for the decline in the spillover income in the quarter?”
Explaining the $21,724,000 decline from $71,797,000 to $50,073,000, CFO Brian Oswald replied, “It's primarily the dividends in excess of earnings for the quarter.”
So, investors should note that Prospect takes portions of that carryover to pay monthly dividend distributions from time to time; therefore, ALL of that $71,797,000 carryover TI must be added to TI Prospect generates during Prospect’s 2015 taxable year. It’s that total TI, to which the tax rules apply that 90% rule (minimum distribution to shareholders) and the 98% rule (to avoid the 4% excise tax).
Prospect’s 6 May 2015 PR (posted with all the other PRs by date on Prospect’s website), which reported Q3FY2015 earnings, displayed a table, which reported that Prospect earned $1.00 per share TI during the first 9 months. That same table also indicated that $1.00 per share TI equates to $352,945,000 on a total dollar basis.
In addition to the $71,797,000 carryover TI from the 2014 taxable year and the $352,945,000 TI generated during the first 9 months (Q1FY2015+Q2FY2015+Q3FY2015), investors need to estimate TI for Q4FY2015. To do this estimate, a prudent investor can postulate that Q4 TI will equal Q3 TI (which assumption may or may not be true). Prospect’s 6 May 2015 PR reports that Q3 TI was $93,688,000.
From these data, a prudent investor can calculate that the TOTAL 2015 taxable year TI will sum to $518,430,000 (=$71,797,000+$352,945,000+$93,688,000).
DIVIDENDS DISTRIBUTED DURING TAXABLE YEAR 2015
According to PRs dated 6 May 2104, 24 September 2014, 8 December 2014, and 6 May 2015, the 12 monthly dividends declared for taxable year 2015 are as follows:
$0.110525 – September 2014 dividend payable 10/22/2014
$0.110550 – October 2014 dividend payable 11/20/2014
$0.110575 – November 2014 dividend payable 12/18/2014
$0.110600 – December 2014 dividend payable 01/22/2015
$0.110625 – January 2015 dividend payable 02/19/2015
$0.08333 – February 2015 dividend payable 03/19/2015
$0.08333 – March 2015 dividend payable 04/23/2015
$0.08333 – April 2015 dividend payable 05/21/2015
$0.08333 – May 2015 dividend payable 06/18/2015
$0.08333 – June 2015 dividend payable 07/23/2015
$0.08333 – July 2015 dividend payable 08/20/2015
$0.08333 – August 2015 dividend payable 09/17/2015
TOTAL = $1.136205
These “per-share” data are provided as a rough guide for the reader, but, to avoid comparing apples to oranges to plums to lemons, etc., one must determine the TOTAL DOLLAR AMOUNTS for these dividends (NOT the per-share data).
Page 4 of the Q3 10-Q reports that, for the 9 months ending 31 March 2016, under the category “Distributions to Shareholders,” that “Distribution from net investment income” was $331,863,000.
Not all of those distributions are allocable to the 2015 taxable year. The June 2014 monthly dividend paid in July 2014, July 2014 monthly dividend paid in August 2014, and the August 2014 monthly dividend paid in September 2014 are ALL allocable to the 2014 taxable year. Page 4 of the Q1 10-Q reports that for the 3 months ending 30 September 2014, under the category “Distributions to Shareholders,” that “Distribution from net investment income” was $114,266,000.
One must then subtract that 3-month $114,266,000 subtotal from the $331,863,000 9-month total to get the total distributions during the first 6 months of the 2015 taxable year. That quantity is $217,597,000 (=$331,863,000-$114,266,000).
Page 2 of the Q3 10-Q reports that “Dividends payable” is $29,887,000. That dollar amount represents the March 2015 monthly dividend paid on 23 April 2015. Page 4 of that same Q3 10-Q also reports that the number of shares outstanding as of 31 March 2015 was 358,661,441. So that $0.08333 monthly dividend paid on 358,661,441 shares would amount to $29,877,259 (=$0.08333x358,661,441shares). That calculated amount matches the dollar amount reported on page 2.
One must ESTIMATE the total monthly dividends for the remaining 5 months (payable May 2015, June 2015, July 2015, August 2015, and September 2015). Prospect’s directors have already declared that the monthly dividends will be $0.08333 per shares per month for the dividends payable through September 2015. According to documents posted on Prospect’s website, Prospect has in the past announced share buybacks only to fail to buy any shares, but this time could be different. Investors also know that Prospect has a dividend reinvestment program. For these calculations a prudent investor could operate under the ASSUMPTION (which may or may not be correct) that the number of shares outstanding during those 6 remaining months is equal to the 358,661,441 shares outstanding as of 31 March 2015 (reported on page 4 of the Q3 10-Q). As a result, a prudent investor could ESTIMATE the total monthly dividend distributions payable during those 6 months from April 2015 through September 2015 as $179,323,547 (=6x$0.08333x358,661,441shares).
By adding the known DOCUMENTED $217,597,000 dividend distributions of the first 6 months of the 2015 taxable year to the $179,323,547 ESTIMATE for the last 6 months of the 2015 taxable year, one calculates the total 12-month monthly distributions equal to $396,920,547 (=$217,597,000+$179,323,547).
90%-OF-TI AMOUNT REQUIRED TO MAINTAIN RIC TAX STATUS
To maintain its tax status as a RIC, PSEC must pay out 90% of its TI to comply with the Annual Distribution Requirement (“ADR”), according to page 153 of the 3Q 10-Q. As calculated above, the total 2015 tax year TI amount to $518,430,000. So, Prospect is required to pay out 90% of that amount, which equals $466,587,000 (=0.90x$518,430,000). Because Prospect’s 2015 tax year total of the monthly dividends adds to $396,920,547, the excess of TI Prospect must pay out as a CASH special dividend to comply with the ADR is $69,666,453 (=$466,587,000-$396,920,547). On a per-share basis, that CASH special dividend translates to $0.19424 per share (=$69,666,453/358,661,441shares). Technically, Prospect must pay MORE than 19 cents and must pay AT LEAST 19.45 cents per share to keep its RIC status.
98%-OF-TI AMOUNT REQUIRED TO AVOID 4% EXCISE TAX
To avoid the 4% excise tax, Prospect must pay out 98% of its TI, according to page 153 of the 3Q 10-Q. With a $518,430,000 TI, Prospect would have to pay out 98% of that amount, which equals $508,061,400 (=0.98x$518,430,000). Because Prospect’s 2015 tax year total of the monthly dividends adds to $396,920,547, the difference between this quantity and the 98% TI requirement is $111,140,853 (=$508,061,400-$396,920,547). On a per-share basis, that amount translates to $0.30988 per share (=$111,140,853/358,661,441shares).
NOTE TO MARIONPOLK2000:
By the way, marionpolk2000, you claim the special dividend would be only 10 cents per share. In a few weeks, we’ll know whether (1) your 10-cent-per-share estimate was right or (2) whether my 19.45-cent-per-share MINIMUM and possibly up to 31-cent-per-share calculation is correct.
jimcooper28. Barry himself owns millions of shares of PSEC. The other officers own many also. They have taken a beating on those shares. It would be difficult to make up thru additional fees taxed at ordinary rates. Maybe they want to do an LBO. Then wait a while and sell the assets at face value and make a huge score. Thoughts?
I think Cooper has been playing the short side to offset his paper losses on the buy side;
So he has an interest in bashing here...my opinion only..
Since the actual special dividend requirement is under ten cents, and could be satisfied by the rights spin-off, don't bother us with your math errors!
Sentiment: Strong Buy
....and, he was generous, characterizing PSEC as essentially an $8 runoff portfolio. What he wasn't factoring was the big run-up in junk spreads - so now its, maybe, a $7 runoff portfolio that STILL has enough hair on it to drive it lower.
Please repost your calcs. i believe there may be a mistake and would like to examine them.
Davejfrompa, the special dividend will be between 19 cents and 31 cents per share, depending on (1) Q4FY2015 taxable income (which should approximate Q3FY2015 taxable income and (2) how much excise tax Barry is willing to pay (zero excise tax in 2014).
At your request, I have omitted the lengthy presentation of calculations and data with citations to source documents with page numbers. IF ANYONE OF YOU WOULD LIKE ME TO REPOST THAT VERY LENGTHY MESSAGE WITH ALL THE CALCULATIONS AND DATA, I WOULD BE HAPPY TO DO SO.