Quick CSWC & PNNT Dividend Updates

Summary

  • CSWC increased its quarterly regular dividend from $0.44 to $0.47 per share for Q4 2021 plus a "final supplemental dividend" of $0.50. This is good and bad news (mostly good).

  • I will have the updated CSWC Deep Dive Projections report out next week discussing as well as its updated LT target price.

  • The CSWC announcement was 10 weeks early, we can expect Q3 2021 to be very strong, management is expecting additional increases to the regular dividend in 2022.

  • It should be noted that Seeking Alpha incorrectly reported that CSWC decreased its dividend by 13%. As mentioned in many previous updates, please watch out for the "breaking news" from SA as there are often mistakes and hopefully the stock will be down so that subscribers can buy more.

  • After the markets closed yesterday, PNNT reaffirmed its Q3 2021 dividend of $0.12 per share which was the 'base case' as discussed earlier this week. I am still expecting an increase to $0.13 announced in December 2021.



The following is an outline for what you can expect each week as we try to provide a balance between easy to digest general information to make timely trading decisions supported by the detail in the Deep Dive Projection reports for subscribers that are building larger BDC portfolios.

  • Monday Morning Update - Each Monday morning we provide quick updates for the sector including significant events for each BDC along with upcoming earnings, reporting, and ex-dividend dates. Also, we provide a list of the best-priced opportunities along with oversold/overbought conditions, and what to look for in the coming week.

  • Deep Dive Projection Reports - Detailed reports on two BDCs each week (TSLX and PNNT this week) prioritized by focusing on "buying opportunities" as well as potential issues such as changes in portfolio credit quality and/or dividend coverage (usually related). This should help subscribers put together a shopping list ready for the next general market pullback.

  • Friday Comparison Reports - Now that BDCs are done reporting Q2 results we will have a series of updates comparing expense/return ratios, leverage, portfolio mix, with discussions of impacts to dividend coverage and risk. 


Recent Updates


CSWC Dividend Update

After the markets closed yesterday, CSWC increased its quarterly regular dividend from $0.44 to $0.47 per share for Q4 2021 and decided to accelerate expected future payments under the supplemental dividend program declaring a "final supplemental dividend" of $0.50 per share.

It should be noted that Seeking Alpha incorrectly reported that CSWC decreased its dividend by 13%. As mentioned in many previous updates, please watch out for the "breaking news" from SA as there are often mistakes and hopefully the stock will be down so that subscribers can buy more.

This is good and bad news (mostly good) for current investors as it likely means that there will no longer be $0.10 per share per quarter of supplemental dividends and just paid out 5 quarters at once. This is similar to what other BDCs have done to reduce the amount of excise tax (similar to TSLX recently) which is a drag on earnings. This will have a meaningful impact on NAV for Q4 2021 as well as the stock price which will be up this morning.

The good news is that the company increased the regular dividend and management likely expects earnings to easily cover over the coming quarters which is why they needed to pay a larger portion in 2021 followed by regular increases in the regular dividend in 2022:

Bowen Diehl, President/CEO: “We are pleased to announce today that our Board has declared a $0.47 regular dividend for the quarter ended December 31, 2021, an increase of 6.8% compared to the $0.44 regular dividend already declared for the quarter ended September 30, 2021. Our recent successful capital markets activities, combined with strong credit portfolio growth and performance, give us confidence that we can continue to steadily grow our regular dividend going forward. In addition, we believe the accelerated distribution of $0.50 per share from our undistributed taxable income (“UTI”) maximizes value for our shareholders, while still maintaining an adequate UTI balance going forward. We have significantly strengthened our balance sheet capitalization since we established the supplemental dividend program in June 2018, and thus feel confident in our ability to accelerate the supplemental dividend payment at this time. Going forward, shareholders will continue to participate in the successful exits of our investment portfolio through special distributions as we monetize the unrealized appreciation in our portfolio.”

It is interesting to note that this announcement was 10 weeks early as the company typically announces Q4 dividends during the third week of October and large Q4 supplementals in November (after assessing taxes) as they did in 2019 for the $0.75 (see below). This means that the company is doing well and we can expect Q3 2021 to be very strong likely with a large amount of realized earnings from equity investments as discussed in previous reports. I will have the updated CSWC Deep Dive Projections report out next week discussing as well as its updated LT target price.


PNNT Dividend Update

After the markets closed yesterday, PNNT reaffirmed its Q3 2021 dividend of $0.12 per share which was the 'base case' as discussed earlier this week. I am still expecting an increase to $0.13 announced in December 2021 and eventually to $0.14 in 2022 as discussed in the report from earlier this week: