Saratoga Investment Corp (SAR) Reports Mixed Fiscal Q3 2024 Results Amid Rising Interest Rates
Net Investment Income (NII): $1.09 per share, down 5% from last quarter but up 27% from the same quarter last year.
Adjusted Net Investment Income: $1.01 per share, a decrease of 6% from last quarter, yet a 31% increase year-over-year.
Assets Under Management (AUM): Increased to $1.114 billion, up 13.4% from the previous year.
Net Asset Value (NAV): $359.6 million, with NAV per share at $27.42.
Dividend Yield: Announced an 11.0% dividend yield based on the recent stock price.
Portfolio Activity: $35.6 million in originations and $2.1 million in repayments during the quarter.
On January 9, 2024, Saratoga Investment Corp (NYSE:SAR) released its 8-K filing, announcing financial results for its fiscal third quarter of 2024. As a specialty finance company, SAR provides customized financing solutions to U.S. middle-market businesses, focusing on senior and unitranche leveraged loans, mezzanine debt, and equity investments.
Financial Performance and Challenges
SAR's financial performance this quarter reflects the impact of rising interest rates, which have contributed to increased earnings from its floating rate assets. However, the company's NII per share saw a sequential decline of 5%, although it was up 27% compared to the same quarter last year. Adjusted NII per share also experienced a decrease from the last quarter but showed significant growth on a year-over-year basis.
The company's AUM grew to $1.114 billion, marking a 13.4% increase from the previous year. This growth is attributed to a stable overall portfolio performance and margin improvement. Despite these achievements, SAR faces challenges, including potential interest rate cuts in 2024, which could impact earnings. However, the company's current earnings yield and overearning of its dividend provide a cushion against such adverse events.
Financial Highlights and Importance
SAR's financial achievements this quarter include a substantial year-over-year increase in earnings, reflecting growth in AUM and improved margins from increasing rates on floating rate assets. The company's ability to overearn its dividend by 29c this quarter, or $1.16 annualized per share, is particularly noteworthy as it contributes to an increase in NAV, supports portfolio growth, and provides a buffer against potential downturns.
For value investors, the company's strong dividend yield of 11.0% and earnings yield of 15.4% are significant indicators of SAR's ability to generate income. Additionally, the company's disciplined approach to credit and investment selection, as well as its diversified funding sources, are crucial for maintaining stability and growth in the asset management industry.
Key Financial Metrics
Important metrics from SAR's financial statements include:
AUM of $1.114 billion, up from $982.034 million the previous year.
NAV of $359.559 million, with NAV per share at $27.42.
Investment Income of $36.340 million, up from $26.257 million in the same quarter last year.
Net Investment Income per share of $1.09, up from $0.83 in the same quarter last year.
Adjusted Net Investment Income per share of $1.01, up from $0.77 in the same quarter last year.
Earnings per share of $(0.31), compared to $0.51 in the same quarter last year.
The rise in interest rates has stabilized in the recent quarter, resulting in elevated margins on our growing portfolio relative to the past year. The continued general contraction of available credit for smaller middle market businesses and our ongoing development of sponsor relationships have created an abundant flow of attractive investment opportunities from high quality sponsors at attractive pricing, terms and absolute rates," said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment.
Analysis of Company's Performance
SAR's performance this quarter demonstrates resilience in a challenging economic environment. The company's strategic focus on high-quality credit and pricing standards has allowed it to maintain a robust pipeline of investment opportunities. Despite market volatility, SAR's disciplined investment approach and experienced management team have positioned the company for long-term growth and quality maintenance.
For further details on Saratoga Investment Corp's fiscal third quarter 2024 results, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Saratoga Investment Corp for further details.
This article first appeared on GuruFocus.
