PSEC NAV has been falling since inception. Large secondary offerings have happened between then and now have helped keep NAV up, or it would be even lower. Notice how there has been EPS at PSEC like 50+ cents and the NAV hasnt moved upwards even with a low payout ratio? Because the portfolio keeps depreciating. Sure the dividends make up for the losses.. but factor taxes on those dividends and look at a performance and the $4.24 of losses of book value since 2007. Looking at that.. The $4.24 of losses to book value and add back dividends of about $8.10 and you have a gain of $3.86 per share but you still owe tax on the dividends. So assume a 35% tax rate and you have $5.265 of dividends after tax and you had $4.24 of losses of book value for a net gain of $1.025 per share. So over a period of those 5 and 1/2 years you get $0.20 per year of dividends (NET). Divide that by say a cost basis of $15.04 (NAV in 2007) and you get a net return per year of 1.36%. Sure makes treasury bonds sound good, doesnt it?
Now it comes down to... Prospects portfolio is larger today.. about 3x larger then 2007. They are heavy in secured debt today. I can't find the exact percent that was secured in 2007. The management team has been through the last crisis in 2008 and it will help with future crisis events to come. Many BDCs never came back to positive ROI for shareholders, PSEC is one of the few that has. So in a sense, PSEC is one of the best BDCs out there.
But what If you wanted to buy PSEC and SPEND the dividends you get every month? What if you are a retired person looking to live off the income of PSEC? Can PSEC provide capital gains and dividend income? Sure, if you buy well below NAV you might get both.. but what about NAV as a function of itself? Can PSEC get the NAV to improve on a consistent basis going foward? Around 2010 was when the NAV just went off a cliff.. not 2008 when the crash happened.. Didnt want to mark to market?
add to that he picked the absolute high point and then we had a meltdown in financials that saw 5 major bank bailouts by the feds and many smaller banks. His thought pattern has little to do with todays situation.
I stick by my analysis and total return estimates. Psec, after taxes on dividends does not return that high as your post suggests. PSEC is a dog right now, and the price for the shares I believe will trade at $10.25 within the next 12 months.
It really comes down to... the price you pay for something like this... The returns are going to be totally different for someone who pays market value today of $11.10 vs someone who picks up shares in the mid to low $10 range when the market pulls back. The trade would to start selling above $11 in blocks and Buy at prices below NAV in blocks... giving plenty of room on both sides of the trade to average up/down cost sell/buy averages.