Shares of Saratoga Investment SAR gained 1.3% after the company announced a hike in its quarterly dividend. The company has declared a quarterly cash dividend of 43 cents per share, representing a hike of 2.4% from the prior payout. The dividend will be paid out on Apr 22 to shareholders of record as of Apr 8.
Based on last day’s closing price of $24.25, Saratoga Investment’s dividend yield currently stands at 7.1%. This yield is not only attractive for income investors but also represents a steady income stream.
The company’s chairman and CEO, Christian L. Oberbeck, said, “We are very pleased that our strong track record, healthy credit profile, robust deal pipeline, and ongoing asset growth continue to generate strong financial performance in support of a program of paying and increasing quarterly dividends. Our dividend strategy is consistent with our overall approach to managing risk conservatively, while pursuing long-term growth and credit quality.”
Saratoga Investment has a track record of consistently increasing dividends. Similar to this hike, the last dividend hike was 2.4%.
Thus, through sustained efficient capital deployments, Saratoga Investment is expected to continue enhancing shareholder value.
Investors interested in this Zacks Rank #3 (Hold) stock can have a look at its fundamentals mentioned below to understand its risks and rewards.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings: Saratoga Investment has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three of the trailing fiscal four quarters, with an average beat of 4.4%.
In fact, its fiscal 2022 earnings are projected to increase 4.5%.
Also, the company has been witnessing upward earnings estimate revisions of late, indicating that analysts are optimistic regarding its earnings growth potential. The Zacks Consensus Estimate for its fiscal 2022 earnings has increased 1.5% over the past 30 days.
Leverage: Saratoga Investment currently has a debt/equity ratio of 0.00, which indicates that the company does not use debt to finance its operations. However, the industry’s debt/equity ratio stands at 0.50. This shows that the company will be financially stable even in adverse economic conditions.
Price Performance: Over the past six months, shares of the company have gained 49.6% compared with 38% growth of the industry it belongs to.
Valuation: Saratoga Investment stock currently seems overvalued when compared with the broader industry. It has a price/earnings (F1) ratio of 11.46, above the industry average of 10.74. Also, its price/cash flow ratio of 10.90 compares slightly unfavorably with the industry’s 10.65.
Return on Equity (ROE): The company’s ROE of 7.97% compares unfavorably with the industry’s 8.56%, reflecting that it does not reinvest its cash as efficiently as its peers.
Other Companies Taking Similar Actions
Over the past few months, several finance firms have announced an increase in their quarterly dividends. Some of these are Fulton Financial Corporation FULT, First Bancorp FBNC and Merchants Bancorp MBIN.
Fulton Financial raised its quarterly dividend by 7.7%, while First Bancorp increased it by 11.1%. Further, Merchants Bancorp announced a 12.5% hike in its dividend.
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