BKCC, one of the BDC (Business Development Company)whose stock is trading around $ 9.11 with a current annual yield of 14.05%. Its book value is around $9.59.
This is what one of the stock analyasts says about this stock:
"Posted on 01/25/10 at 1:46pm by Monica Gerson Analysts at Stifel Nicolaus upgrade BlackRock Kelso Capital Corp (NASDAQ: BKCC) from “hold” to “buy.” The target price for BKCC is set to $11.
The upgrade in the rating is based on valuation, according to Stifel Nicolaus. The analysts expect BlackRock Kelso Capital to be able to successfully refinance the credit facility that is due to mature in December 2010.The recent selling pressure witnessed by BKCC in the recent past is likely to short term, the analysts add.
The analysts expect BKCC to witness long-term earning of $1.20. Stifel Nicolaus has raised its 1Q10 EPS estimate from $0.32 to $0.39."
There is no reason, based on the above EPS estimate that BKCC will not continue in paying at least 30 cents quarterly dividend per share ($ 1.20 annual dividend) that will gives it a 13.2% annual dividend, which is still well above that of other BDCs such as HTGC, PNNT, ARCC. In short, I believe this BDC is currently very under value.
The company will announce its EPS on March 10, 2010 and if its EPS meets or exceeds estimate and its dividend declared remains the same, then you will not see this stock stay under $10 too long. On the other hand, if for some reasons they will reduce dividend, just as HTGC did, then it will provide the best opportunity to purchase this stock in bargain prices because with the current stock price of around $9.11 even with an annual dividend only $ 1.00 (25 cents per quarter), it will provide an annual return of almost 11%. (*Upon hearing HTGC's reducing dividend, it dropped to $ 8.23 and went back up to the recent $ 9.85, truly unbelievable. I think I will put in a large buy order for BKCC on March 9, 2010).
Wait for another three months, you may regret why you did not buy this one. I have been hoarding this one and will not sell any of it.
Isn't CLO just private equity and leveraged buyouts? It seems to me you have to be suspect of any firm whose main purpose in life is:
1) Buying decent and honest firms in order to 2) Gut them of all of their cash in order to pay out a special "dividend" 3) Load them up with debt in order to pay out more dividends 4) Leave them drifting in the wind until the stock market takes the lifeless carcass off your hands
BDCs strike me as much more interesting. They are supplying lifeblood capital to companies and they seem to align their interests with shareholders more directly.
Be careful of these mortgage reits. They have short term financing (liabilities) versus Long Term Investments (assets). On top of that they leverage up the balance sheet.If rates go up they stand to lose. The key is to buy them when interest rates are high and heading down. We are in the opposite postion right now.
im looking for good dividend paying stocks. i have been a few today. your post is empressive. all the analysis is good. more important to me is your take on it. i have put it on my list. thanks. i really appreciate it.