HTGC

Hercules: Big Yield BDC, Very High Valuation

Hercules is a big-dividend (9.4% yield, not counting supplemental dividends) business development company (“BDC”) that we purchased in March and that has now experienced significant share price gains since the Silicon Valley Bank panic at that time (Hercules provides financing in the same high-growth / venture-backed lending space). And the shares now trade at a very high price-to-book valuation. In this report, we review the business, current market conditions, the company’s financial position, dividend, valuation and risks. We conclude with our opinion on investing.

Two (2) New Buys: 1 Income Equity, 1 (More) Disciplined Growth

We do NOT buy or sell often, but this is just a quick update to let readers know we have made two more new purchases (the second and third new buys this week). One in our Income Equity Portfolio and now a second buy this week in our Disciplined Growth Portfolio. We’ll be completing our monthly portfolio tracker sheet updates shortly after April begins, but wanted to let readers know right away of these two additional new purchases.

Fed Rate Hikes To Impact Top Big-Dividend BDCs

With the Fed set to raise interest rates another 75 basis points on Wednesday (following its 2-day open market committee meeting which kicks off today), it’s worthwhile to revisit big-dividend BDC and how they are impacted by rising rates. This note shares data on how many of the most popular publicly-traded BDCs are impacted differently by rising rates depending on the structure of their balance sheets (floating-versus-fixed-rate assets and liabilities, as well as leverage levels). We also highlight a few of our favorite BDCs (two we own and one we are considering) that yield 9.1%, 10.0% and 10.2%, respectively.