FSC is one of the big 5 BDCs. They trade at about 0.83x book value, and pay $1.10 pear year (monthly payer, so at $8/share the yield is about 14%. The RAISED the dividend (from $1.00 per year to $1.10 per year) starting in the month of October 2014, so hopefully won't need to cut it soon. But who knows?
Here's their commentary on Q4 2014. If anyone can explain why they are trading at 0.83x book value and yielding 14%, please let me know.
WHERE ARE THE WARTS??
finance.yahoo.com
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Fundamentals Strong Despite Capital Markets Volatility
Throughout the fall, share prices across the business development company ("BDC") landscape were under pressure. During December, the industry came under additional pressure due to concerns regarding exposure to the energy sector, a sell-off in high yield markets and tax loss selling. As a result, BDCs on average ended the calendar year down 5.4% on a total return basis, with valuation multiples at about 0.87x price to net asset value.1
Despite capital markets volatility, the middle market lending environment remains relatively healthy and somewhat insulated from trends in the broadly syndicated lending market.
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De Minimis Energy Exposure Across the Platform
As mentioned above, the BDC sector has come under pressure due to concerns about exposure to energy-related industries. In December, KBW estimated that approximately 7.0% of overall BDC portfolios were invested in energy-related businesses. At both FSC and FSFR, investments are diversified across a wide variety of industries and both portfolios have modest exposure to the energy sector. As of September 30, 2014, FSC's exposure to the energy sector was 3.8% of investments at fair value, comprised of senior secured loans to four portfolio companies in the oil and gas equipment services sector. Since then, two of the four businesses with exposure to the energy sector have been sold at fair value. Pro forma for these sales, FSC's energy exposure is now 2.5%.
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Active December Quarter Leads to Strong Originations
Historically, the December quarter has been the most active for originations. Driven by our leading middle market origination platform, which sources loans with strong risk-adjusted returns across the capital structure, we closed approximately $1.3 billion in originations across the Fifth Street platform during the December quarter. We closed all of the deals in our pipeline that were expected to fund before calendar year end, which is unusual, since typically a handful of deals slip from one quarter to the next. That was not the case during the December quarter, and as a result, FSC generated over $675 million in gross originations and $350 million of net originations.
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