This stock is the perfect storm. It has everything you could want in an income investment - 0 debt, high yield, low payout ratio, and monthly payments. What more can you ask in a stock? As long as management doesn't try to fix the goose, I'll keep collecting my golden eggs!
i love gain but i was just turned onto arr and psec from a friend. the arr and psec both pay monthly dividend of ten cents. i just got 10 shares added for my 750 shares of arr friday. in my wifes i have 1000 shares . paid 13 shares . i love it. also the share price has steadily climbed. big down days it drops like 4 cents a share. they did share offering. it droppped .20 cents. i added at that point. right now its my biggest gainer and im not in fear. gain is good , it moves more volitile . great for trading and or holding for the dividend.
In general David Gladstone's companies have performed poorly since he was co-running Allied Capital in the late 1990s. Allied went through a firesale to ARCC. GLAD's ROE has been in the low single digits, GOOD has also been in the low single digits (although this may be somewhat understated due depreciation possibly exceeding market values declines) and GAIN has been the best performer, with a long term ROE of around 6%.
You can't pretend that 2008-09 didn't happen, esp. since asset prices have now pretty much round tripped back to 2007 levels.
There is nothing wrong with selling preferred stock to better match asset/liability durations but if you lever up and make bad investments . . .well.
Gladstone wants capital that is under his control. The situation with DeutscheBank in 2008/2009 really compounded the downturn from GAIN. You can't make long-term commitments of the type GAIN does with a revolving facility. At best, it can be a little grease for the wheels, but you have to keep a lot of cash on hand. GAIN has $80M of cash that the shareholders would love to see deployed.
On write-downs, GAIN had $12M of realized and unrealized gains in the past 9 mo. In 2010 this was close to zero, and in 2009 it's no secret that the portfolio got hammered. It's not a good measure to compare cost of preferred financing to ROE. You can compare cost of capital to what it's being used for, but this is complicated because of the significant equity and options involved in GAIN's portfolio. Or you could say that GAIN had a return on invested capital of 13% over the past 9 mo. and compare that to equity risk premiums for their industry.
Does your outlook for GAIN's future business resemble 2009 or 2011?
My bad. The long term debt is 0, but their current debt is 105 million.
They announced an offering of 1 million preferred shares to pay off that debt. I wonder what the new monthly dividend obligation is going to be for those new shares?
Will watch closely to see if it this deal starts to stink. the "good" news is gladstone's other incarnations GOOD & GLAD have already issued such shares and they're still trucking.
Watch how this develops for GAIN in the next couple of months...
It borrows money to loan money to levered company so it has debt on debt. The payout ratio is around 85-90%, which I wouldn't describe as low.
Plus you get DG as a manager . . . one of the worst in the industry.