Author Topic: What is everyone's take on PSEC? Prospect Capital Corp  (Read 4830 times)

aaengel

  • 5 O'Clock Shadow
  • *
  • Posts: 4
What is everyone's take on PSEC? Prospect Capital Corp
« on: April 01, 2014, 12:30:40 PM »
Hello all,

New member here, just starting to get into investing... I have 101 shares of PSEC... 11 cent monthly dividend. Before I buy more, what's the sustainability of this company... I've researched the dividend history, and they've pretty much sustained their dividend, even through the 2009 crisis (though they flipped from quarterly to monthly in 2010 and it dropped 11 cents)... anyways, a seeking alpha article was trying to do some articles on whether or not its sustainable... is there any wise people here that can look into it for me? I'm not too keen yet on understanding the financial numbers that are on my broker's website for PSEC's strength.

And while we're at it, how do you guys view SDRL? Someone told me about this one and it has a massive dividend....

matchewed

  • Magnum Stache
  • ******
  • Posts: 4335
  • Location: CT
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #1 on: April 01, 2014, 12:37:47 PM »
What is the health of the company? How much income does it have coming in? What sort of market is it in? What sort of debts does it have? What percentage of the market does it have? Is it growing or not? Have you even read their balance sheet or 10-K?

Before looking at or even thinking of the dividend I'd assess the basics of the company first. But then again putting your eggs into a single basket is usually a bad idea. Especially if it is a basket you don't know or understand.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 1901
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #2 on: April 01, 2014, 12:59:06 PM »
I just looked at PSEC and it has a payout ratio of 114%

I know nothing about it though.

SDRL I used to own.   The guy that runs it runs (ran?) FRO (frontline) which went from $30 to $2 (now back to $4).

Fredrickson or something like that.  A smart guy though.

soccerluvof4

  • Walrus Stache
  • *******
  • Posts: 5488
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #3 on: April 01, 2014, 01:40:18 PM »
The Stock is down 3.74% ytd however that whole sector has been hit .  I have owned shares of Prospect Capital (PSEC) for a long time. Owning and forgetting it! Management is doing well navigating differing and difficult market conditions over the past six or seven years, and it has rewarded patient investors with an outstanding flow of dividends over the years. When we get a market decline that pushes the price down, I just buy a little more. The stock is yielding at 12% right now, and it is a decent buy for disciplined long-term income investors.

But this is totally of my view from my research and in no way a recommendation! Do your own research!! Higher Yield usually means higher risk!

« Last Edit: April 01, 2014, 01:48:18 PM by soccerluvof4 »

aaengel

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #4 on: April 01, 2014, 11:29:45 PM »
I just looked at PSEC and it has a payout ratio of 114%

I know nothing about it though.

SDRL I used to own.   The guy that runs it runs (ran?) FRO (frontline) which went from $30 to $2 (now back to $4).

Fredrickson or something like that.  A smart guy though.

So, what should I fear when a payout ratio is 114%?

wtjbatman

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Age: 36
  • Location: Missouri
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #5 on: April 02, 2014, 02:54:51 AM »
I just looked at PSEC and it has a payout ratio of 114%

I know nothing about it though.

SDRL I used to own.   The guy that runs it runs (ran?) FRO (frontline) which went from $30 to $2 (now back to $4).

Fredrickson or something like that.  A smart guy though.

So, what should I fear when a payout ratio is 114%?

It means they are paying 114% of their earnings out as the dividend. So they are paying out more money than they are making.

Which means they are drawing on their cash reserves, or picking up debt. Or both. In the long haul it's (obviously) unsustainable.

soccerluvof4

  • Walrus Stache
  • *******
  • Posts: 5488
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #6 on: April 02, 2014, 06:44:03 AM »
I just looked at PSEC and it has a payout ratio of 114%

I know nothing about it though.

SDRL I used to own.   The guy that runs it runs (ran?) FRO (frontline) which went from $30 to $2 (now back to $4).

Fredrickson or something like that.  A smart guy though.




So, what should I fear when a payout ratio is 114%?

It means they are paying 114% of their earnings out as the dividend. So they are paying out more money than they are making.

Which means they are drawing on their cash reserves, or picking up debt. Or both. In the long haul it's (obviously) unsustainable.




As I suggested to the OP do research on the company. To say the company cant maintain it is false if you dont do the research and consider the work that they have done over the last 5 years. Yes they cant maintain it if they dont get in the black but there is more to consider than that. which is why they haven't cut the dividend thus far.   Even if they cut the dividend in half be over 6% not to mention if you read the P&Ls over the last 5 years and listen to the conference calls as I stated the company so far has been doing everything right.  Thats not to say there isnt risk and that could change so protect yourself if need be BUT if I am going to have a high Yielder this is one of them, as its payout has been rewarding and has a great management team and diversified portfolio.  But also if the OP only is buying this stock that is never a good idea as well.

Barry John F who is Chief Executive Officer at Prospect Capital Corporation bought 100,000 shares at $10.86 on March 21, 2014. Following this transaction, the Chief Executive Officer owned 3.8 million shares meaning that the stake was reduced by 2.71% with the 100,000-share transaction.

Currently there are 6 analysts that rate Prospect Capital Corporation a buy, no analysts rate it a sell, and 4 rate it a hold

Not to mention today they had a record quarter and while the price might be suppressed for awhile I will take the juicy dividend.

http://seekingalpha.com/article/2121463-a-record-quarter-for-prospect-capital

Again these are my opinions and as stated the stock fits my criteria but in no way is a recommendation and IMHO opinion if this is the only stock you have you should be more diversified anyhow with consideration of some high yielders.


To answer your other question I am long SDRL, NE and ESV
« Last Edit: April 02, 2014, 06:55:45 AM by soccerluvof4 »

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28062
  • Age: -999
  • Location: Seattle, WA
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #7 on: April 02, 2014, 07:18:23 AM »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

soccerluvof4

  • Walrus Stache
  • *******
  • Posts: 5488
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #8 on: April 02, 2014, 07:22:10 AM »
Currently there are 6 analysts that rate Prospect Capital Corporation a buy, no analysts rate it a sell, and 4 rate it a hold

Quote
As of Oct. 18, 2001, all 15 analysts tracked by Thomson Financial/First Call rated Enron a “buy”–12 of the 15 called it a “strong buy.”



I know what your saying :-)  Thats why it was just a part of my overview including " not putting all your eggs in one basket basically" and stipulated that while right for me might not be right for someone else.  If you go just by analysts you would lose your ass .  Just one part of a forumla one needs to look at. So no argument from me!


wtjbatman

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Age: 36
  • Location: Missouri
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #9 on: April 02, 2014, 07:33:08 AM »
I just looked at PSEC and it has a payout ratio of 114%

I know nothing about it though.

SDRL I used to own.   The guy that runs it runs (ran?) FRO (frontline) which went from $30 to $2 (now back to $4).

Fredrickson or something like that.  A smart guy though.




So, what should I fear when a payout ratio is 114%?

It means they are paying 114% of their earnings out as the dividend. So they are paying out more money than they are making.

Which means they are drawing on their cash reserves, or picking up debt. Or both. In the long haul it's (obviously) unsustainable.

As I suggested to the OP do research on the company. To say the company cant maintain it is false if you dont do the research and consider the work that they have done over the last 5 years. Yes they cant maintain it if they dont get in the black but there is more to consider than that. which is why they haven't cut the dividend thus far.   Even if they cut the dividend in half be over 6% not to mention if you read the P&Ls over the last 5 years and listen to the conference calls as I stated the company so far has been doing everything right.  Thats not to say there isnt risk and that could change so protect yourself if need be BUT if I am going to have a high Yielder this is one of them, as its payout has been rewarding and has a great management team and diversified portfolio.  But also if the OP only is buying this stock that is never a good idea as well.

Fair enough. I haven't researched them and I have no interest in researching them.

But the OP asked why he should "fear" a payout ratio of 114%, and I answered as best to my knowledge of such high payout ratios in general. Barring a financial crisis where earnings are temporarily suppressed (making the dividend appear unsustainable), I can't imagine a scenario where I would invest in a company paying out more than its earnings.

But that's just me. As you like to say, do your own friggin research :)

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 1901
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #10 on: April 02, 2014, 07:49:22 AM »
Compare that with Corning or Cisco whose payout ratio is 29% and 45% respectively.  (Corning could pay a bit more IMO).  Both companies are cash rich and somewhat diversified.

Microsoft, Apple, Intel, all have payout ratios under 50%.

Pfizer has a payout ratio of only 30% even though it is paying a 3.3% dividend!

soccerluvof4

  • Walrus Stache
  • *******
  • Posts: 5488
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: What is everyone's take on PSEC? Prospect Capital Corp
« Reply #11 on: April 02, 2014, 07:52:31 AM »
Compare that with Corning or Cisco whose payout ratio is 29% and 45% respectively.  (Corning could pay a bit more IMO).  Both companies are cash rich and somewhat diversified.

Microsoft, Apple, Intel, all have payout ratios under 50%.

Pfizer has a payout ratio of only 30% even though it is paying a 3.3% dividend!


Hence my point on being diversified.