Bullish Fool story on ALD. Snip:
Allied Capital has been around since 1960, and has had 38 consecutive years without a lowered dividend payout (current yield is just shy of 9%). When most people think of private capital, they think of the big-risk/big-return venture capital game, but in actuality that's just a small part of the private capital world.
Allied provides equity to companies in illiquid situations so they can factor receivables, restructure balance sheets, fund expansion, or to finance a merger or acquisition. Additionally, Allied Capital holds about 25% of its funds in commercial mortgage-backed securities, which it seeks to buy well below face value. In exchange for its money, Allied Capital takes notes that average about 14% interest, an occasional equity kicker (adding a few more basis points to overall returns), and it will generally demand oversight over the recipient company's board of directors. Almost all of Allied's loans are fixed rate.
Allied Capital deals in some fairly risky situations, but it does so in situations where it has a level of compensation that balances out the higher risk. The company does not expect perfection. In fact, there has been some controversy surrounding its carrying value of an impaired loan made to Velocidata, which led to questions about the company's valuing techniques for less-transparent holdings. According to the company, they rate their portfolio components from 1 to 5, with 1 being for companies in which a capital gain is expected, 2 for ones performing as expected, on down to 5 where a loss of principal is expected. At present, more than 90% of Allied Capital's portfolio is rated 1 or 2. The recent controversy surrounding Allied's carrying values, in no small part, has opened up an opportunity for you now: a lower stock price on a long-term performer pushes the odds in your favor.
I like the dividend, I like the company's 17%+ return on equity from last year, I like the fact that this is a company that practices disciplined pricing first, followed by growth.
fool.com
(No mention of the recent law suits, which I think is around 5 or 6) |
