ACSF looks like an interesting play. The Company invests in Senior Secured, Floating Rate, broadly syndicated loans, meaning they are a higher quality, lower risk BDC, loaning into a very large market. ASCF came to market on 1/15/14 and by the end of the March quarter their IPO funds were fully invested. This kind of BDC usually delivers lower dividend yields but still appeals to many investors because of their higher safety status. And yes, ACSF does have about 17% of their portfolio in CLO's (limited to 20%) in order to boost the portfolio yield. The management fee structure is one of the lowest in the industry with a low management fee and no incentive fees. The portfolio is clean with no non-accrual loans. KBW recently referred to ACSF as their Best BDC Idea, and currently have an Outperform Rating with a $16.50 target price. The short term catalyst here is that ACSF, on March 17th, declared their first dividend (for a partial quarter) of $.18. The street talk is that ACSF will soon declare a $.28 quarterly dividend on NII earnings of $.29. On the CC, ACSF management, in response to an analysts question, said they do not totally disagree with the approach used by the analyst in determining a $.28 to $.29 run rate for the coming quarter. As of the Thursday closing price of $13.96, ACSF is selling at .924 of book value and if the next Q dividend is $.28, the dividend yield will be 8.02% which is above the peer group** average. Since the Q1 earnings report, there have been four insider buys of the stock. Finally, we know that the exclusion of all BDC's from the Russell Indexes on June 27th is an overhanging drag on the entire BDC industry. There are no shares of ACSF in any of the Russell Indexes so the sale of BDC's out of the those Indexes on June 27th should have no affect on ACSF.
** Peer Group consists of four Externally Managed Floating Rate Senior Secured BDC's and they are PFLT, SUNS, FSFR, and ACSF.
My guess, based on my history with ACAS babies .. is that though their current NOI could support $0.28, that they will choose to be conservative and come out this first full Q at $0.25-$0.27 and bank the excess as a cushion for lumpy Q's.
It's good to keep in mind that BDC/RIC's aren't required to distribute taxable income until 9 months AFTER they closing of the taxable-year in which they are earned. If ACSF has a tax-year ending in Dec, the earnings could be carried and undistributed until August 2015. Therefore, it doesn't hurt ACSF to keep some of those earnings to ensure that they can build a history of continuously growing dividends, which will help they PPS vs NAV .. thus putting them in position to do a 2ndary once PPS is greater than NAV.
jan814......... that KBW tidbit you mentioned is really good to hear, considering KBW has the most thorough coverage of BDCs of all the rating agencies. it will be interesting to see where the share price goes with the raised dividend. if the past quarter is any indication, we should hear about the next dividend around june 17.
Yes, I too believe KBW is the most thorough of the BDC analysts. If memory serves me correctly, ACSF is the only BDC on the KBW Analyst Select List. They also like HCAP. Their rating is "Buy" with a price target of $16, well above the current price of $14.21. This morning I put some words on HCAP up on that chat room. If you have an interest you may want to go over there and take a look.