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Solar Capital Ltd. (SLRC) Message Board

  • jackmaster20 jackmaster20 Oct 31, 2013 12:34 PM Flag

    Question regarding SLRC purchases......

    If SLRC spent approx $ 16 million last quarter to buy SLRC at an avg price of $ 21.99.
    That's about $ 727,000 shares. Does SLRC pay the 40 cent dividend out to those
    shares ? That would cost about $ 290,000.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • No, and that is the motive for a company like this to buy back the shares. To me the results say that Gross doesn't find other investments that are available in the market as compelling as buying SLRC stock at 7.25% yield. A dollar saved on paying the dividend is a dollar earned for shareholders. It's better than holding cash, that's for sure. But it's not a good sign for real growth, only "fake" EPS/DCF growth by making the denominator (share count) smaller. Not great news for SLRC holders, but I have to agree with Gross. I haven't bought anything in awhile - most stuff seems to be fully valued, and knowing that rates will be going up in the near future doesn't help matters for income investors. Holding treasury stock and keeping the dividends may not be a bad move here....but it isn't going to help short-term performance.

      Sentiment: Hold

      • 1 Reply to strum_this
      • So SLRC buys large fees to refi its revolver, which impacts NII per share, then he goes
        and uses cash to buyback shares........?? As an investor in SLRC how do I benefit from
        Gross buying his own stock....he didn't raise the dividend due to having fewer shares outstanding.

        Why not simply hold cash and wait for the rates to go up and buy new loads when yields are
        higher.....?

        Only thing that could help performance would be to allow the stock price to drop and allow
        investors to buy at lower levels, if they want, and realize the better dividend yield.....!!

        I am not saying "buy weak deals now" its OK to be patient with originations.........what I am
        saying "let the market determine the yield on SLRC stock and get away from artificial buyback
        uses of cash"

    • If SLRC mgmt spent $ 16 million to support the $ 22 stock price......why didn't SLRC increase the dividend
      by 5 cents, to 45 cents this quarter ? This would have cost only $ 2.5 million & I would argue this would
      move the SLRC stock price higher, for a longer period of time than stock buybacks. Also would have saved
      SLRC about $ 13 million. Stated another way, the $ 16 million spent on this quarter's buyback is 6 months
      of Crystal Financials' cash dividend to SLRC.....??

      Why does Gross want to keep the stock yield close to 7.25 % ....? Why not allow the market decide
      for itself the stock "spot" yield, that could be above 8 % easily...?

      How does Gross benefit from a higher stock price ...? He makes more from fees than from his
      SLRC stock position, that's for sure. So I don't buy he is doing this to maintain the value of his
      shares in SLRC stock, as his primary motive. Something else is going on here.

      Any explanations on why is is happening is appreciated.

    • According to Wikipedia, a company either retires repurchased shares or keeps them as treasury stock, available for re-issuance.

      Since dividends are only paid on outstanding shares, not treasury stock, the answer should be "no".

 
SLRC
20.78-0.01(-0.05%)Jul 21 4:00 PMEDT

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