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For dividend investors, one of the companies that people are familiar with are the Gladstone Companies which are headquartered in the Washington D.C. area and provides financing to and acquire lower middle market companies, acquire commercial real estate and farmland nationwide and pay monthly cash distributions to their shareholders.
Their four publicly-traded investment funds are: Gladstone Capital (NASDAQ: GLAD), Gladstone Investment (NASDAQ: GAIN), Gladstone Commercial (NASDAQ: GOOD) and Gladstone Land (NASDAQ: LAND).
For today, I am going to take a look at Gladstone Capital (NASDAQ: GLAD) which is a BDC (Business Development Company) and 89% of GLAD’s investment portfolio is secured debt (56^% first lien and 33% second lien).
Looking at their chart from 2001-2021, Gladstone Capital Corp. (NASDAQ: GLAD) started at $16.00 and reached its peak at nearly $26 in 2006. But around the market crash, GLAD took a drop at under $5 and since then, has stayed consistent around +/- $10.
Since the Pandemic, we have started to see the stock grow to its current price of around $11.35 and has a 52-week range of $6.97 to $11.95.
Market cap is around $381.9 million and enterprise value of $604.5 million with 33.65 million shares outstanding and 11% held by institutions.
With that being said, being a BDC, what investors value BDC’s is the fact that they are monthly passive income producers and one that is not known for growth.
Currently CFRA’s Quantitative Stock Report has GLAD at a recommendation of “HOLD”, quality at negative, growth at positive, street sentiment at negative and price momentum at positive. CFRA also has the risk evaluation set at Moderate as of July 22nd.
And since 2013, the company has been consistent with a $.84 annual dividend with 2020, the Pandemic year, being its only year of decrease and losing $.04. But 2021 looks to be another year of a dividend cut as it goes to $.78 annually with its monthly dividend at $0.065 at $6.85% yield and an its earnings per share at $1.84 and price/earnings of $6.17. And a forward P/E of $11.35.
My concern for Gladstone Capital is that the total debt of GLAD has continually increased from $86 million in 2013 to $222 million in 2020. Each year, the debt of the company has increased but the fund’s revenue has increased from 50.0 million in 2019 and during the Pandemic, still earning $48 million despite how bad the market was in March 2020.
The company has no doubt potential to make new investments and so far it has been resilient and nearly consistent for the past ten years. And while I don’t know if GLAD will ever reach its pre-market crash of 2008 pricing, I do know that as long as thee stock price stays at around $11 and they continue to pay a monthly dividend at a 6.85% yield, GLAD will continue to attract investors who are in it for the monthly dividend.
For me, I offloaded plenty of mREITS, so I kind of looked for a BDC that has been consistent and Gladstone Capital Corp.’s history shows how they remained resilient after the 2008 market crash and during the pandemic.
GLAD makes for a good dividend play for those who are retiring and want dividends each month and may be attractive for this low price of under $12. But not so attractive for dividend growth investors who would rather have seen GLAD consistently growing past $15 and then past $20 but it hasn’t.
For me, I own GLAD for dividend play but also wanting to see what Gladstone Capital Corp. has planned in terms of new investments. Great for those who owned the stock when it dipped to $4.04 or even under $10 during the Pandemic but I don’t have a huge position with Gladstone Capital Corp. (NASDAQ: GLAD) but I’m content with holding with what I have for the long-term.
As always, perform your due diligence and do a lot of research before investing. Talk to a financial advisor and find out if Gladstone Capital (NASDAQ: GLAD) would be a perfect investment for you.
