FS KKR Capital also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans or mezzanine loans. In connection with the debt investments, the firm also receives equity interests, such as warrants or options, as additional consideration. It also seeks to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.
On an opportunistic basis, the fund may invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations or companies with speculative business plans. It seeks to invest in small and middle-market companies based in the United States. The fund seeks to invest in firms with annual revenue between $10 million and $2.5 billion. It seeks to exit from securities by selling them in a privately negotiated over-the-counter market.
The company posted stellar quarterly results, announced a huge stock buyback and raised the $0.65 per share dividend to $0.68.
Shareholders receive a 12.57% dividend. The price target at Jefferies is $25, while the consensus target is $23.06. The shares closed on Wednesday at $21.64.
Oaktree Specialty Lending
This lower-priced BDC stock offers investors the ability to buy more shares. Oaktree Specialty Lending Corp. (NASDAQ: OCSL) specializes in investments in middle-market, bridge financing, first and second lien debt financing, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, and management buyouts in small and midsized companies.
The fund seeks to invest in education services, business services, retail and consumer, health care, manufacturing, food and restaurants, construction and engineering, and media and advertising sectors. It invests between $5 million to $75 million principally in the form of one-stop, first lien and second lien debt investments, which may include an equity co-investment component in companies with enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America, and the fund seeks to be a lead investor in its portfolio companies.
Investors receive an 8.88% dividend. Jefferies has an $8.50 price target. The $8.14 consensus target also compares with Wednesday’s close at $7.04.
While the Jefferies price targets are not sky-high, combined with the strong dividends, the total return possibilities for all these companies look to be very solid. Given the segment also has been somewhat out of favor, this year the riskeward also looks compelling, especially given the strong results that all six of the companies have reported so far.
Originally posted at 24/7 Wall St.
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