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Re: TCAP falls close to 10% yesterday. rlp2451 asked " In your opinion, what is a good entry price for TCAP?" I want to avoid high PWAY BDCs that have a record of dividend cuts. Anyone searching for the 'right' price for TCAP is asking the wrong question. On the other had, TCAP may have found the right portfolio of stuff to own based on its NAV trend. But I would want a longer trend in that metric before I had certainty on that assessment. I believe a div cut is coming. But who knows if TCAP is going to 'right size' the next dividend cut? As of Q2-17, the trend in non-accrual was going to wrong way. The data:
We are too close to the next reporting of this number to be making bets of any size. So without getting too deep in the analysis - (1) We do not know if the PWAY will continue to fall - or by how much. (2) We do not know if they will right size the dividend and (3) We do not know if the non-accrual trend is still negative. Unanswered questions like that say "stay on the sidelines". But . . . if the Q3-17 NAV stays flat and NII stays above $0.40, then a div cut to $0.38 would be right sized. That would put the div/NAV at (4 times 0.38 divided by 14.83) 10.2%. An acceptable yield after the cut would be 11%. At $13.81 and a $1.52 dividend, the yield would be 11%. The market (at the current price) is saying those "ifs" are not very likely. Of course, we know that the market is not saying anything. It is only following the most recent borrowed opinion. Summation - the current price is a good entry point on this nest egg eating snake that conservative investor should never own. |
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