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Prospect Capital Corporation Message Board

  • virtualanalyst virtualanalyst Nov 20, 2012 10:30 AM Flag

    According to PSEC Website 87% of 2011 Divs were NOT QUALIFIED (for 15% rate)- 2010 was 90%

    this is from there website

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    • As has been explained by others here, non qualified dividends are the norm from BDC's.

      If you want to look at the components of past dividends, I'd be more critical of the ROC percentage of the dividend over the last three years. ROC is not the norm for BDC's. The ROC component means the BDC has paid out more than they earned during those years, and they are just giving shareholders their own money back, after PSEC first collects their management fees.

      That said, PSEC has had a constructive year, and I can't see how there would be any ROC component to their dividend in 2012, and there shouldn't be any for the foreseeable future.

      There may be a higher percentage of qualified income in 2012 depending on how they've categorized those big capital gains from Gas Solutions & NRG. Long Term Capital Gains would be qualified, but I admit the way they've structured those two sales, running the profits of those two sales through their newly formed Energy Solutions Holdings, has me a bit confused as to how much of those sales are going to be reflected as long term capital gains vs dividend income.

      On the same topic, but a different BDC, MAIN announced they expect a full 50% of their 2012 dividend will be categorized as long term capital gains. For those holding this one in a taxable account, that makes this relatively low yielding BDC's dividend look a bit more attractive. Not to mention they've raised their dividend 3 times in 2012 for a total of an 11.1% increase, plus are paying a $0.35 special dividend in early January.

      RC

    • So what? PSEC is BDC (Business Development Company) stock, and as a regulated investment corporation (RIC), in oder for a BDC stock to NOT have to pay any taxes at the corporate level, they (PSEC and/or any BDC stock) have to distribute at least 90% of their earnings to shareholders in dividends. Therefore, when a shareholder gets dividends from a BDC stock, those dividends have not been taxed at the corporate level (unlike non-BDC stocks, such as IBM, Microsoft, etc.., who pays tax at the corporate level and then pays it's shareholders any dividends that it decides to dish out), so the individual shareholder is required to pay ordinary income tax rates on the BDC dividends. As a result and to compensate for this, BDC stocks usually pay a higher dividend rate than most non-BDC stocks.

 
PSEC
8.74-0.030(-0.34%)Mar 5 4:00 PMEST

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