Gladstone Capital Corporation: 8.4% Dividend Yield, Monthly Dividends, And Growth From Rising Interest Rates

Now that the Federal Reserve has begun raising interest rates, yields are starting to climb. However, rates still remain well below their pre-Great Recession levels. As a result, high yields are hard to find. Gladstone Capital Corporation (GLAD) is a BDC with a current dividend yield of 8.4%. It is one of 416 stocks with a 5%+ dividend yield.

You can see the full list of established 5%+ yielding stocks by clicking here.

And, including GLAD, there are only 29 stocks that pay dividends each month, versus the more traditional quarterly or semi-annual payment schedules.

You can see the entire list of all 29 monthly dividend stocks by clicking here.

GLAD’s dividend yield towers above the rest of the market. The S&P 500 Index, on average, has a dividend yield of just 2%. This article will discuss why GLAD could be an attractive stock for income investors.

Business Overview

GLAD is a closed-end management investment company. It operates as a Business Development Company, and invests in debt and equity securities. As of December 31st, 2016, GLAD had total investments of $288 million at fair value. The companies it invests in typically have several features in common:

  • Stable earnings and cash flow
  • Strong management teams
  • Lower-middle market focus

These are companies with leadership positions in their respective industries, growth potential, and annual EBITDA between $3 million-$15 million. A selection of GLAD’s portfolio investments is as follows:

GLAD Portfolio

Source: Quarterly Performance Review, page 16

In order for GLAD to keep paying its hefty dividends to shareholders, it is critical that its investment portfolio continues to generate interest and dividend income and capital gains, in excess of its operating and financial expenses. GLAD’s debt investments primarily consist of senior term loans, senior subordinated loans, and junior subordinated loans, made to small and medium sized businesses. It has a diversified portfolio, both in terms of deal sourcing, and industry groups.

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