Stellus Capital Investment Corporation (NYSE: SCM) and Golub Capital BDC (NASDAQ:GBDC) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, institutional ownership, valuation, earnings and profitability.
Stellus Capital Investment Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.0%. Golub Capital BDC pays an annual dividend of $1.28 per share and has a dividend yield of 6.9%. Stellus Capital Investment Corporation pays out 64.2% of its earnings in the form of a dividend. Golub Capital BDC pays out 96.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Stellus Capital Investment Corporation and Golub Capital BDC’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Stellus Capital Investment Corporation||68.17%||10.06%||5.01%|
|Golub Capital BDC||53.62%||7.86%||3.95%|
Insider & Institutional Ownership
26.5% of Stellus Capital Investment Corporation shares are held by institutional investors. Comparatively, 41.6% of Golub Capital BDC shares are held by institutional investors. 4.2% of Stellus Capital Investment Corporation shares are held by company insiders. Comparatively, 2.4% of Golub Capital BDC shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
This is a summary of current ratings and price targets for Stellus Capital Investment Corporation and Golub Capital BDC, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Stellus Capital Investment Corporation||0||1||2||0||2.67|
|Golub Capital BDC||0||4||0||0||2.00|
Stellus Capital Investment Corporation presently has a consensus target price of $15.00, suggesting a potential upside of 10.29%. Golub Capital BDC has a consensus target price of $19.00, suggesting a potential upside of 2.76%. Given Stellus Capital Investment Corporation’s stronger consensus rating and higher probable upside, research analysts plainly believe Stellus Capital Investment Corporation is more favorable than Golub Capital BDC.
Risk and Volatility
Stellus Capital Investment Corporation has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Golub Capital BDC has a beta of 0.69, suggesting that its share price is 31% less volatile than the S&P 500.
Earnings and Valuation
This table compares Stellus Capital Investment Corporation and Golub Capital BDC’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Stellus Capital Investment Corporation||N/A||N/A||N/A||$2.12||6.42|
|Golub Capital BDC||N/A||N/A||N/A||$1.33||13.90|
Stellus Capital Investment Corporation is trading at a lower price-to-earnings ratio than Golub Capital BDC, indicating that it is currently the more affordable of the two stocks.
Stellus Capital Investment Corporation beats Golub Capital BDC on 10 of the 12 factors compared between the two stocks.
About Stellus Capital Investment Corporation
Stellus Capital Investment Corporation is a closed-end, non-diversified management investment company. The Company originates and invests primarily in private middle-market companies through first lien, second lien, unitranche and mezzanine debt financing, with corresponding equity co-investments. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation. It invests in various sectors, such as business services, energy, general industrial, government services, healthcare, software and specialty finance. Its investment advisor is Stellus Capital Management, LLC (Stellus Capital Management). Stellus Capital Management is responsible for analyzing investment opportunities, conducting research and performing due diligence on investments, negotiating and structuring the Company’s investments, originating prospective investments, and monitoring its investments and portfolio companies on an ongoing basis.
About Golub Capital BDC
Golub Capital BDC, Inc. is an externally managed, non-diversified, closed-end, management investment company. The Company’s investment objective is to generate current income and capital appreciation by investing primarily in senior secured and one stop loans of the United States middle-market companies. It may also selectively invest in second lien and subordinated loans of, and warrants and minority equity securities in the United States middle-market companies. The Company seeks to create a portfolio that includes primarily senior secured and one stop loans by primarily investing in the securities of the United States middle-market companies. It generally invests in securities that have been rated below investment grade by independent rating agencies or that would be rated below investment grade if they were rated. The Company’s investment activities are managed by its investment advisor, GC Advisors LLC (GC Advisors).
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