"Capital Southwest lends to private-equity-backed lower middle market businesses, almost entirely in first lien senior secured debt at a weighted average yield of 11.3%. About 95% of that portfolio is floating rate, so when the Federal Reserve cuts, CSWC earns less."
"Pre-tax net investment income ran $0.60 in the December quarter and $0.61 in September, comfortably above the $0.58 quarterly regular base. CFO Chris Rehberger told investors the company maintained 106% regular dividend coverage for the trailing twelve months."
"The pressure point is rates. Management disclosed that a 75 basis point decline in base rates would cut annual NII by roughly $11.1 million, or $0.19 per share."
Capital Southwest offers a monthly dividend of $0.1934 and a quarterly supplemental of $0.06, totaling approximately $0.64 per quarter. The company operates a $2.01 billion portfolio, primarily lending to lower middle market businesses through first lien senior secured debt. With 94% of investment income from cash interest, the company has maintained a 106% coverage for its regular dividend. However, a decline in base rates could impact net investment income, highlighting the sensitivity of earnings to interest rate changes.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]