Triangle Capital: Dividend Outlook Short Term and Long Term

We’ve just reviewed Triangle Capital’s (TCAP) 10-Q filing for the period ended June 30, 2010, listened to the company’s first ever Conference Call on August 5th, and looked over the Earnings Report again. All of this with a view to providing readers with our outlook for TCAP’s dividend. WHY THE DIVIDEND IS IMPORTANT: For most investors in BDCs, the dividend level is a key element in the buy or sell decision. That’s because the dividend is a useful proxy for earnings, as BDCs are required to distribute essentially all their taxable earnings (not including Unrealized Gains or Losses) in the form of distributions. [Like everything else in the Business Development Company arena, though, nothing is black and white. BDCs have a variety of dividend strategies: some pay out a distribution higher than current earnings in the anticipation that profits will grow as capital is deployed. Others religiously pay out only what is earned, or projected to be earned, in the current tax year. Some BDCs pay out only a portion of earnings, squirreling away the rest for future periods.] Notwithstanding all the above, a company’s dividend is a very useful indicator of its financial health and prospects. Most investors seek BDCs that promise a steady, or increasing dividend level. Usually a reduction in the dividend results both in lower income and a reduced stock price.... Read more

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