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Saratoga Investment Corp. Message Board

  • mrmonarch2000 mrmonarch2000 Dec 2, 2011 2:15 PM Flag

    Calculation of share price for dividend

    I forgot how they did this last year. Was it an average of pre dividend or ex dividend share prices? How many days, and when is the cutoff date?

    On related topic, does anybody know if the IRS rule permitting payment of divs in stock is being extended into next year? Or should we expect all cash?

    I didn't listen to the last cc.

    Thanks for any feedback.

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    • The dividend is paid in late Dec. Last year they took the average price of three trading days in December and made that the effective price of the stock dividend, so it was based on the post dividend price. If the price remains at current levels then it will be about a 20% stock dividend.

      The IRS ruling expires at the end of this year as far as I know. The ruling was passed mainly to help REITs, BDCs just got in on a technicality. SAR will have to start paying a dividend next year. They could support a rate of about $2 per share per year. However if the company is priced for a 15% yield that only gives you a price of $13 which is where it is trading now. I don't see much hope of a higher price unless something (SBIC license? takeover?) happens.

      The company might give up its tax exempt RIC status to avoid paying dividends. One BDC (ACAS) has already done that. I wouldn't put it past them...

      • 1 Reply to scioslurker
      • Thanks for the reply. Yes, I looked up the pertinent PR from last year, which suggests the averaging dates this year will be 12-21 through 12-23.

        Any way you slice it, shareholders will get hit with some massive dilution -- 18% most likely. Not to mention the tax bill.

        It's funny, any other BDC might be buying back their own stock at this magnitude of discount. But these guys choose to issue more stock.

        Or is it that they HAVE to issue the stock for some reason?

        Very strange.

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