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Strategies & Market Trends : Dividend investing for retirement

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To: sm1th who wrote (24111)	12/26/2015 8:35:31 PM
From: Elroy	Read Replies (1) of 34328

I don't follow this company, but there is always a reason a company needs to pay 14% to attract capital. BDCs need to payout some percentage of their taxable income (either 96% or 90%, can't quite recall) in order to qualify for the zero tax benefit they receive (so the shareholders pay taxes on distributions, but the BDC pays zero tax on its income). So the reason PSEC is paying out 14% is because PSEC's stock is low. PSEC the company is earning about $1.00 per year, so they will pay out $1.00 whether the PSEC shares are $7 (and thus yielding 14%) or the PSEC shares are $20 (and thus yielding 5%). Usually in involves a high risk of bankruptcy. If it were truly worth $11.00 that is where it would be trading. This idea is why I'm interested to read the bear's explanation for PSEC's share price. For me, $10.17 worth of stuff that pays out $1.00 per year is worth MORE than $10.17. $10.17 cash pays me nothing, so logically $10.17 in PSEC that pays me $1.00 per year is worth more than the cash. Yet the market says PSEC with perhaps $10.17 of stuff is worth only $7.00 or so. I'm curious why others think it is not a good investment.

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