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Msg  3271 of 3300  at  1/11/2020 12:53:50 PM  by

factoids

The following message was updated on 1/12/2020 12:45:52 AM.

SAR Fails to raise dividend in Q1-20

 
This is the first time since roughly 2015 that SAR has failed to raise the div by a penny per quarter.
 
NEW YORK, Jan. 08, 2020 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal third quarter. In addition, the Company announced that its Board of Directors has declared a dividend of $0.56 per share for the fiscal quarter ended November 30, 2019, payable on February 6, 2020, to all stockholders of record at the close of business on January 24, 2020.
 
SAR reported their calendar Q4-19 (or fiscal Q3-20) numbers of 1/08/20.
 

     Q4-19     Q3-19     Q2-19     Q1-19     Q4-18     Q3-18     Q2-18     Q1-18     Q4-17     Q3-17     Q2-17     Q1-17     Q4-16     Q3-16     Q2-2016     Q1-2016     Q4-2015     Q3-2015     Q2-2015    Q1-2015
Realized & Unrealized Gains 9,142 2.624 3.968 3.764 -1.470-0.0853 -0.085 2.212 1.247 6.870-2.490 .155-1.8452.6680.749-3.5031.271-2.4155.614-0.184
Realized & Unrealized Gains/share  0.9109 0.3149 0.5123 0.4996 -0.1965 -0.0136 
 -0.0136 0.3893 0.2064 0.6682 -0.4248
0.264 -$0.3321 $0.4647 $0.1305 -$0.6157 $0.2257 -$0.4325 $1.0354 -$0.0340
 
In 12 out of the last 20 quarters, "Realized and unrealized Gains" have been positive. This is a superior record.
 
 

     Q4-19     Q3-19     Q2-19     Q1-19     Q4-18     Q3-18     Q2-18     Q1-18     Q4-17     Q3-17     Q2-17     Q1-17     Q4-16     Q3-16     Q2-2016     Q1-2016     Q4-2015     Q3-2015     Q2-2015    Q1-2015
Total investment income 14.19613.88812.75112.98412.83311.40310.48810.1289.52610.2548.7078.3588.4428.4487.9087.7956.9367.7587.5617.451
Net investment income 4.575 4.956 3.681 4.091 5.139 5.114 3.928 3.3213.016 2.8913.5041.100*3.4192.6042.5393.1002.1503.6571.7712.888
Investments @ fair value 0.487 0.487 0.409 0.307 0.444 0.393 0.343 0.3430.339 0.3330.3300.2930.2780.2730.2640.2840.2410.2520.2630.241
Wt Av Share Count 10.0368.3347.7467.5347.4806.9166.2766.2446.0405.9955.8625.7565.7285.7415.7375.6895.6325.5845.4425.402
TII/share $1.4145 $1.6664 $1.6461 $1.7233 $1.7156 $1.6488 $1.6711 $1.6220 $1.5772 $1.7219 $1.4853 $1.4521 $1.4738 $1.4715$1.3784$1.4053$1.2315$1.3893$1.3894$1.3793
NII/share$0.4559$0.5947$0.4752$0.5430$0.6870$0.7394$0.6259$0.5319$0.4993$0.4855$0.5977$0.1911$0.5969$0.4536$0.4426$0.5449$0.3817$0.6549$0.3254$0.5346
Div/share$0.56 $0.56 $0.55 $0.54 $0.53 $0.52 $0.51 $0.50 $0.49 $0.48 $0.47 $0.46 $0.45 $0.44 $0.43 $0.41 $0.36 $0.33 $0.27 $0.22
NAV/share$25.30$24.47$24.06$23.62$23.13$23.16$23.06$22.96$22.58$22.37$21.69$21.97$22.21$22.39$22.11$22.06$22.59$22.42$22.75$22.70
Wt Av Yield Total 9.8% 10.1% 10.6%10.7%10.8%10.8%11.3%11.1% 11.3%11.2%11.4%11.4%10.8%10.5%11.5%11.5%11.2%12.6%12.0%11.8%
Wt Av Yield BDC(1st+2nd) 10.7% 10.5% 11.3%11.3%11.7%11.1%11.2%11.0%10.85%11.3%11.6%11.1%11.1%10.8%11.0%11.0%10.8%10.9%11.1%
Wt Av Yield CLOs 14.9% 14.7% 16.0%14.6%13.3%17.6%23.2%21.2% 19.4%18.8%15.7%15.7%12.2%19.4%17.3%16.4%18.9%37.8%28.8%
 
  SAR's weighted average share count is significantly rising. TII is failing to rise enough to offset the share count rise. As a result, NII/share is falling . . . AND the NII has fallen below the dividend.
 
SAR is priced for perfection at the current 8.26% yield. Given the historical dividend and NAV growth (both excellent), there was justification for that valuation.  On the other hand, given the NII/share trend, there is justification for a boat load of pessimism.
 
When BDCs raise equity, the share count can and will go up before that new money can be deployed. As a result, NII/share falls. That is going on here. At the same time, the is a lot of dollar amount NII volatility. 
 
In a volatile environment, it would really help to have some meaningful metrics to lean upon. That is not happening. Look at the numbers from Yahoo Finance:
 
Earnings History 2/27/2019 5/30/2019 8/30/2019 11/29/2019
EPS Est.0.640.590.610.58
EPS Actual1.080.990.911.37
Difference0.440.400.300.79
Surprise %68.80%67.80%49.20%136.20%
 
There are several BDCs where Yahoo fails to produce earnings numbers that are a match to NII. The Yahoo numbers include lines of income that belong in the NAV calculation. The actual NII for the quarter ending Nov 29 is $0.4559 (or 46 cents) -- That would be an earnings disappointment.  As a result of showing the adulterate non-GAAP number of "1.37", Yahoo (incorrectly) shows an earnings beat.
 
From Seeking Alpha
Saratoga Investment (NYSE:SAR): Q3 Non-GAAP NII of $0.61 beats by $0.03; GAAP NII of $0.46 misses by $0.12.
 
Those (Seeking Alpha reported) numbers provide the correct picture. And is most cases, the non-GAAP numbers provide the most accurate picture. That is not the case with SAR in this quarter. SAR has a price above the NAV. And selling new shares above the NAV raises the NAV. SAR sold a lot of shares (notice share count growth).  The non-GAAP beat was due to lines of income --  that do not belong in NII -- being included.
 
But at the same time - the NAV was increasing the old fashion way -- asset were being sold at a profit. I could not find the dollars of increase "due to share selling" or the dollars of NAV increase "due to rising asset values". 
 
Conclusion - In almost all cases, it is the movement in the NAV that is the most important thing. There is usually noise in the NII. SAR had a NAV increase for the quarter. In this case, the NAV increase was due to both the increase in the share count and increase is asset value. The larger news is in the NII. (1) NII/share is down - and (2) NII is well below the dividend.
 
I would need to see the numbers for the upcoming quarter to confirm the trends before I could make a confident assessment. I need to see NII above the dividend. That could happen next quarter. So everything could be OK. But if fiscal Q1-2020 NII fails to be above the dividend -- share holders need to be selling. A disappointment next quarter would make 3 of the last 4 quarters where NII was below the dividend.
 


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