Rare Opportunity With 13% Yield: Capital Southwest

Seeking AlphaDividend Ideas | Financials Rare Opportunity With 13% Yield: Capital SouthwestNov. 14, 2020 9:35 AM ET|| About: Capital Southwest (CSWC), Includes: ARCC, BDCS, BIZD, CSWCL, CSWI, MAIN, NEWT, NEWTI, NEWTLby: Rida MorwaRida Morwa High Dividend OpportunitiesThe #1 Service for Income Investors and Retirees, 9-10% dividend yield.SummaryWe look for BDCs with good company performance but lagging share price.
CSWC is an "under the radar" BDC that remade itself five years ago.
CSWC is internally managed and has a strong track record.
Today it yields 13%, a rare opportunity.
Co-produced with PendragonY
What we look for in a BDC
Main Street Capital (MAIN) is one of the best BDC (Business Development Companies) out there. MAIN is internally managed and has over the years consistently increased NAV (Net Asset Value) and NII (Net Investment Income). They also have consistently raised their dividend. However, the market recognizes that and so they also have consistently traded at a very high premium to NAV.
Nobody goes there anymore, it's too crowded - Yogi Berra
Unfortunately, the popularity of MAIN makes its stock price too pricey most of the time. So we want to look for a BDC that's managed much like MAIN while being overlooked by the market. One of our favorites in the BDC space is Ares Capital (ARCC) with a yield of 10.4% which just reported some great earnings on Oct. 27. The market gives ARCC a big discount because of an external manager. Another great BDC is Newtek Business Services (NEWT) which is overlooked because of its smaller cap and because it isn't a typical BDC. Like MAIN, NEWT is internally managed.
Capital Southwest Corp. (CSWC) is an internally managed BDC that has been around a long time and began being regulated as a BDC in 1988. Being internally managed is a great plus, meaning that its management is aligned with the interests of shareholders. It has been around a lot longer than MAIN (another internally... Read more