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For this post, I am taking a look at a company in the financial sector, and it’s a BDC (Business Development Company), Sixth Street Specialty Lending Inc. (NYSE: TSLX).
According to the website:
Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a specialty finance company focused on providing flexible, fully committed financing solutions to middle market companies principally located in the US. We partner with companies across a variety of industries and excel at providing creative solutions to companies with complex business models that may have limited access to capital.
The collective insights of our seasoned investment team enable us to provide a diversity of capital structure solutions tailored to the unique needs of our partners. This expertise is complemented by our connectivity with the significant investment and operating resources of Sixth Street, a global investment firm with over $50 billion in assets under management.
We have elected to be regulated as a business development company, or a BDC, under the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. Sixth Street Specialty Lending, Inc. is managed by Sixth Street Specialty Lending Advisers, LLC (the “Adviser”), an SEC-registered investment adviser. The Adviser sources and manages the portfolio through a team of investment professionals with significant expertise in middle market lending.
The company has a team of investment professionals based in San Francisco, New York, Boston and London and directly source off-market opportunities to invest in middle market companies. Their direct sourcing efforts are complemented by their connectivity with the Sixth Street platform and network of advisors.
Before I begin discussing Sixth Street Specialty Lending Inc. (NYSE: TSLX), I currently do not have a position in the company at this time.
So, Sixth Street Specialty Lending Inc. (NYSE: TSLX) invests in U.S. middle-market companies through senior secured loans (which are debt obligations generally issued by non-investment grade businesses) and also mezzanine loans (which combines debt and equity financing and most commonly utilized in the expansion of established companies).
Sixth Street Specialty Lending Inc. (NYSE: TSLX) currently is sold at $23.05 as of August 6th and has a 52 week range of $15.07-$23.97. The stock which has hovered over $20, did drop during the pandemic at under $12 but has since grown gradually above $20.
Its market cap is $1.7 billion, enterprise value of $3.0 bilion, 72.84 million shares outstanding and 48% shares are held by institutions.
The company has generated up to $270 million in total investment income and during the pandemic, actually did well in revenue surpassing 70 million in the first and second quarter. In 2021, the first two quarters have been under $66 million.
But one has to look at the growth of the company since the company was founded and has had a 123% cumulative gain.
Currently, Sixth Street Specialty Lending Inc. (NYSE: TSLX) has a quarterly dividend of $.41 ($1.64 annually) with an annual dividend yield of 7.11%. Earnings per share is $3.46 and price/earnings is $6.66 and a forward P/E of 11.44.
The company pays out dividends quarterly but some off months they have paid a special and supplemental dividends.
The company no doubt has a strong balance sheet and their second quarter results conference was quite promising as CEO Joshua Easterly said, “After market closed yesterday, we reported second quarter adjusted net investment income per share of $0.46, exceeding our quarterly base dividend per share of $0.41.This corresponds to the annualized return on equity of 11%. Adjusted net income per share for the quarter was $0.88, which corresponds to an annualized return on equity of 21.4%. Year-to-date, our annualized return on equity on adjusted net investment income is 12.4%, ahead of our full year target of 11.5% to 12%. And return on equity on an adjusted net income is 22.2%”.
And I also like the thinking behind the company’s overall plans, Easterly said, “We’re focused on shareholder returns and not growing assets. And so if we can find assets that provide that earn or exceed our cost of capital and provide shareholder returns, we will grow. If we can’t, we will not, and we’ve sized the book to be fully invested in the trough opportunity set”.
For the most part, Sixth Street Specialty Lending Inc. (NYSE: TSLX) is a well-managed BDC with solid fundamentals but definitely do your research as there are many other BDC’s out there.
As always, perform your due diligence and do a lot of research before investing. Talk to a financial advisor and find out if Sixth Street Specialty Lending Inc. (NYSE: TSLX) would be a perfect investment for you.
