  There are many ways to seek Income while hoping for some capital gains down the road, but sleeping (like the cub above) isn't one of them. That is why investors like me purchased dividend-paying stocks like AT&T (NYSE:T), Verizon (NYSE:VZ) and pharmaceutical giant Novartis (NYSE:NVS). Some investors like the ETF approach like the WisdomTree LargeCap Dividend Fund (NYSE:DLN) or the Claymore/Zacks Intl Multi-Asset Income Fund (NYSE:HGI).
Martin Hutchinson, the editor of The Permanent Wealth Investor (www.MoneyMapPress.com) recently made a recommendation to subscribers (which includes me), and with his permission I'd like to call your attention to it. It is a "Business Development Corporation" that knows how to raise capital and who to lend it to, and... "What's more, it just raised another $64 million in equity and closed a $250 million debt deal, so it will have more "ammunition" to expand its business during the current downturn, while money is tight and sound deals are fairly easily come by. The company is Prospect Capital Corporation (NASDAQ:PSEC).
"PSEC is a closed end investment fund that provides private capital in the form of mezzanine debt and private equity to companies primarily in the natural resources and industrial sectors. As a closed end fund, it is expected for tax reasons to pay out at least 90% of its income in dividends, but in recent years has paid somewhat less than this. "There appear to be no "self-liquidating" features about the fund, and its new infusion of debt and equity capital will allow it to grow further in the downturn. I like its portfolio's concentration in natural resources and I expect oil and minerals prices to be fairly strong going forward on the back of rising Asian demand.
"PSEC has increased its dividend in every one of the last 17 quarters and with a dividend yield around 16% is currently a highly attractive investment - the fund is selling around 20% below its net asset value, an additional attraction.
"PSEC's top management consists of former equity and industrial bankers from Merrill Lynch, who have been in this business over 20 years. Insiders hold 1.2 million shares, and have purchased a net 210,000 shares in the 12 months to March. The incentives of management and shareholders thus seem adequately aligned, always a worry in the financial services sector." At their web site, Prospect Capital Corporation describes themselves as follows: Prospect Capital Corporation is a mezzanine debt and private equity firm that manages a publicly-traded, closed-end, dividend-focused investment company (NasdaqNM: PSEC).
Prospect primarily provides non-control debt financing to management teams or financial sponsors. In addition, Prospect selectively makes control acquisitions by providing multiple levels of the capital structure. Prospect reviews a range of financing situations, including: | | |
| | - Mezzanine Debt
- Acquisitions
- Growth
| - Development
- Financings
- Recapitalizations
| | | As a yield-oriented company, Prospect seeks investments with historical cash flows, asset collateral, or contracted pro forma cash flows. |
Taken from the home page at http://www.prospectstreet.com/ Yesterday I heard a fund manager interviewed about "Business Development Companies" (BDC) and he mentioned that one of his favorites was PSEC. He mentioned that a BDC has to pay out most of their income like a REIT, and that a promising BDC like PSEC has an advantage because they are "cashed up" and thus capable of "...buying big portfolios of other distressed BDCs at big discounts due to the current credit conditions. He said that another example of a BDC is Chimera Investment Corporation (NYSE:CIM) which he also owned in the fund he managed (sorry, but I didn't get the name of his fund or his name either).
Disclosure:I recently purchased my first installment of PSEC at around $8.80 a share. If the shares drop below $8 due to overall market conditions I want to buy the second installment. The dividend yield alone should tell you that this investment has a higher-than-normal amout of volatility. Do your own careful due diligence before you choose to invest, and understand the risks involved. Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please remember investments can fall as well as rise. And they will! - Advanced Investor Technologies LLC accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this content.
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