One thought: I am not a great trader, but I'm probably not unusual in that regard. I think that return from divies is not the same as a return from price appreciation. The simple reason is that if you buy a stock at $3.39 [SFI], the chances that you will keep it until it gets to $14.48 is slim. Yes, some people do, but I think most people look at a double, and sell. Maybe they then buy back in, etc. but the return ends up being much less than the 327% it might have been. Dividends are not that way. No one thinks: "Oh the divy is really high, I better sell, unless you doubted the company in the first place." Ergo, I tend to buy high-paying dividend stocks, and look for a chance that one of them will show price appreciation on top of that. Two years ago, that was MTGE; last year it was NTI; and this year it is NRF. Just saying that looking for the rocket often results in lost opportunities [and money] which is why I do it the way I do. That makes RSO a buy now, and next year it may be a high-flyer at $7.50 - $8.00 a share. Just recognition that my trading limitations influence my trading strategies. GL2Y
" ... annual decreases in their dividends."
Really? Looks like they have cut divies once since the end of 2010 from $0.25 to $0.20. Actually, their divy record is better than either of the other two:
SFI divy: 0.0%
NRF divy: 6.7%
RSO divy: 14.5%
Long both NRF and RSO.
If Jon is accurate about his guidance - and it appears he is - then maybe the result of his guidance is accurate also: $0.20 for the rest of this year, and core earnings exceeding that number as we leave the year.
AFFO was $0.14 last quarter .... it is likely to be higher for the 1st quarter. maybe $0.16.
Interesting, but I have no idea how any analyst can estimate earnings when the big deals that drive PSEC cannot be guessed in advance. I bet they haven't even figured in the huge deals closed in the last couple of weeks.
Also, when you figure the spread on a deal, if it has been levered using a bank credit facility [all of them do, I believe] remember to add another 1% for use of the facility. PSEC has to pay to have the facility available - typically 1% of the unused balance - but doesn't incur this expense when the facility is in use.
I can't imagine anything but strong results for the rest of the year and beyond.
"I will only gamble with my dividend and not with my principle."
I think it's kinda hard to do that since the stock price is heavily influenced by the dividend. However, I'm with you on PSEC: long 75,000 shares or $100k per year divy.
The economic environment is sooooooooo good for BDC's right now that even I could make money doing it [well, maybe not]. RSO will pay $0.80 this year, and will hit $7.00 by year's end. Look for a divy increase next year to $1.00, and another dollar on the PPS.
No miracle. This was a brilliantly timed SPO ... quite possibly at a price that won't be seen again for a while. As far as investing the money goes, these people are buying MBS. They are not making deals like an equity REIT; they are buying MBS at the MBS store ... could be invested in a day or two. Even the non-agency is mostly jumbo MBS not purchased by the agencies. And they will be buying current paper which is paying much higher rates than a year ago. In addition, and unlike equity, the debt they buy earns interest day-by-day not at the end of the quarter like dividends. I think this is a great move, and expect that it will help maintain the divy if not increase it.
It is interesting that all the REIT's and BDC's that I have are down today except for RSO which is up ... slightly, but up. I think it shows some underlying strength developing.
"Prospect Capital Corporation announced today that it has priced a public offering of $300 million in aggregate principal amount of its 5.000% senior unsecured notes due 2019"
This money will pay down the credit facility so they can use the credit to purchase/finance what little of the world remains that they haven't bought/financed yet.
In a recent interview, PSEC Prez said that the ratings agencies have indicated that PSEC's debt would retain it's investment grade even if PSEC increases its debt-to-equity from about 50% to 75%. Accordingly, with interest rates so low, Prez said that PSEC will be increasing their own debt some to provide higher leverage. If so, this increases risk slightly, but should increase NII and NAV to fuel a higher PPS, and possibly a higher divy.
I did not question your background, but I did feel that you were questioning mine with questions like, "Now how much do you own or are you a little pumper for pennies." So, I gave you a little of my history so you might judge better. I don't claim to be the best at this or the most knowledgeable, but I have had some successful since starting to invest in March, 2009. Anyway, I have made my thoughts on PSEC clear so I am off to the dentist. GL and buy some PSEC.
I hope you don't think I said any of your three points as I didn't say those things.
Equity is not the only way to generate cap gains as these companies mark-to-market, and the value of their debt assets also can be a source of NAV and thereby stock price appreciation [or depreciation].
Hopefully I have some knowledge of business as I am a CPA, having worked for PWC for 6 years, and subsequently was general manager of two businesses for 25 years .. the second of the two I also founded.
I am now a full-time investor so I do invest for income as this is the source of my extravagant lifestyle. Accordingly, I don't look to PSEC for cap gains, but I am not oblivious to the possibility either. My total return last year was 38%, and it's 5.5% for the first quarter this year. Note that my return is hurt by the fact that I withdrawn some funds to live on which are not then reinvested.
I don't see that you disclosed your holdings, but it appears that you own nothing at this time. I am long 75,000 shares.
No, it hasn't gotten to $18, but it has been over $12 a number of times since 3-09, and over $13 at least once. There is certainly room to add a "couple of bucks" as my posts suggests.
Is this the caution you are referring to? Quote by Cohen in last CC:
"We expect to earn AFFO this year 2014 of $0.75 to $0.80 and net income of close to $0.60. We anticipate leaving 2014 with a run rate that is in excess of our current dividend. In addition, we expect to grow book value through the sale of investments that are not producing current income such as our $40 million investment in LEAF Commercial Capital. We are very optimistic in this regard."
"When they are paying all of thier income out they can not increase NAV."
Not true ... certainly not for the deals that include equity participation as several have lately.
Just curious, Beard, do you own any PSEC, or are you just someone who thinks he knows something.
PSEC is vaulting into a whole 'nother league. Not only will their NII increase noticeably, their NAV will also. You can guess all you want about the quality of the two enormous positions just announced, but it is just guessing. This is a deal-driven business; either you believe in management's ability and judgment or not ... just that simple. If management is right, then this stock will be adding a couple of bucks soon, and a dividend increase is likely [not talking about the little, tiny increases]. With the U.S. economy looking increasingly better, I like our chances.
I think the market was pretty unimpressed with the $0.14 quarterly AFFO [even though that was a $0.02 beat of estimates] hence the sliding price. RSO has everything it needs to right the ship over the next couple of quarters: plenty of cash, plenty of credit available, and plenty of opportunities according to management. Re-read the CC transcript. I know they have a credibility problem, but if they do what they say, this stock continues the $0.20 and will see $7.00 by year's end ... or more. Keep an eye on it.