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Strategies & Market Trends : Dividend investing for retirement
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Thehammer
To: Thehammer who wrote (24057)12/15/2015 9:07:07 PM
From: Elroy1 Recommendation  Read Replies (1) of 34328
 
Yeah, the story with PSEC seems to be that when the economy is perceived as strengthening then rates will rise, so PSEC stock declines. Then when the economy is perceived as weakening so defaults will increase so PSEC stock declines. High yield is out of favor so PSEC stock declines. Some high yield fund closes redemptions so PSEC stock declines.

But PSEC just keeps plunking along earning and distributing about 25 cents per Q from their investments and keeping book value above $10 and buying back a little stock and what else can they do?

I suppose it is possible for both scenarios to come true - rates rise AND defaults increase going forward, but that doesn't make a whole lot of sense.

Time will tell. You say PSEC is at the bottom of the BDC lending space, but they don't seem to have abnormal default rates as long as I've been watching them - in fact, they seem to have lower default rates than other BDCs. But that's the type of thing that can reverse in any quarterly report.

They give trailing 12 month default rates for their CLO portfolio, which is a huge portfolio (I think they are the largest player in that space, maybe it's 30% of their assets?). The trailing 12 month default rate is always below 1.00%, and the cash yield is around 24%. Ha ha. It sounds too good to be true, but it has been like that as long as they have been reporting those numbers.

And come on, at $6.50 with a last reported NAV above $10, they could have 15% of their loan portfolio default completely and still be trading below book value.

Management bought over a million bucks in PSEC stock last week.
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