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Fifth Street Finance Corp. Message Board

  • beauzeau23 beauzeau23 Nov 20, 2013 3:10 PM Flag

    Another dividend cut is a done deal

    Current earnings only cover 92% of dividend. FSC WILL NOT pay a dividend that involves a return of capital due to the high institutional ownership. Look for another cut next quarter to about .085 per month.
    Look to buy at $7 to $8 per share after the cut.

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    • Did you smoke the same thing that Slick smoked? For FSC to drop to the $7-8 range, DOW will have to drop 3,200 points or more or it has to reduce its dividend by 30% or more. I cannot say it would not happen, but the chance of FED's starting bond tapering on December is higher than FSC's price dropped to your predicted range. I also do not see the 9.10-9.25 range either. Well, it would be indeed very interesting if FSC will announce the same dividend when they announce their next earnings, many of you will get caught with your pants off because FSC will then shoot up to the $ 9.35 range. How funny will that be? Trying to time the market in this environment is a fool's game. You are better off in just listening to Bernake or Yellen speak because every time the FED spoke, the market fell. I did tell you to buy some DXD today.

    • Dividend cut to 9 cents is already priced in. We don't know if they will cut it since they've been doing a few things to increase interest income as well as lower borrowing costs. Further, the quality of their portfolio is better than most -- and that's worth something. The stock is trading near NAV and having this fall to $8 or less is way too extreme. The NII is about the same as last year, and they did have ROC in last year's 1099-DIV.

      We'll find out next week. They usually announce the next few months of divdends with the earnings report.

      The dividend coverage you are citing (from SeekingAlpha article no doubt) is based on one quarter NII of 26 cents. The quarter before that it was 27 cents and the quarter before that it was 28 cents, and before that it was 29 cents. To a large extent, the decline in NII was becasue of offerings and lower yields, as well as timing of loan payoffs and the time for new loans to be made and earn income.

      New acquisitions did not have enough time to show up in NII:
      1) Healthcare Finance Group -- acquired in May would not have shown much NII for the period ending June 30
      2) Venture lending through Fifth Street Technology Partners and aircraft leasing sector (First Star Aviation LLC) were acquired in August. Those did not have sufficent time to show much NII for the period ending September 30.
      3) Likewise for new loans and loan payoff activity
      There has been plenty of activity here -- including lowering their borrowing costs (one credit facility was lowered to LIBOR + 2.25% and another at LIBOR + 2.5%).

      There's a lot of moving parts here. Even if the period ending Sept 30 remains at 26 cents, that does not necessarily mean a cut. If mgmt thinks NII will get back to 28 cents or more, then the dividend is safe. Worst case is a cut to 9 cents per month and pps falls a little to NAV ($9.90). IMO, that's priced in. On the other hand, if they maintain 9.5 cents; I don't see any reason for a rally.

    • FSC releases EPS on Nov. 25th after the close (next Monday). From last report it looks like they announce div rates along w/ the eps report. Is this correct?


    • I agree.............maybe arround 9.10 to 9.25 is more realistic though.

    • Dividend cut may be coming, but $7-$8 per share is likely not.

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