Owl Rock Capital’s Dividend Sustainability Analysis (Indications Of An Undervalued Stock) – Owl Rock Capital Corporation (NYSE:ORCC)

Focus of Article:

The focus of this article is to provide a detailed analysis with supporting documentation (via three tests) on the dividend sustainability of Owl Rock Capital Corp. (ORCC) over the foreseeable future. This analysis will be provided after a brief overview of ORCC’s regulated investment company (“RIC”) classification per the Internal Revenue Code (“IRC”). The first test will focus on ORCC’s net investment income (“NII”). This test will be termed “TEST 1”. The next two tests will focus on ORCC’s net investment company taxable income (“ICTI”) and cumulative undistributed taxable income (“UTI”). These two tests will be termed “TEST 2” and “TEST 3”. At the end of this article, there will be a conclusion based on the results obtained from TEST 1, TEST 2, and TEST 3 about the dividend sustainability of ORCC through 2020. I will also provide my projection regarding ORCC’s quarterly dividend per share rate range during 2020.

Understanding the tax and dividend payout characteristics of ORCC will provide investors with an overall better understanding of the business development company (“BDC”) sector as a whole. From reading this article, investors will better understand how a RIC per the IRC comes up with the company’s current dividend per share rate and specific signs when an impending increase or decrease should occur. Periodically, I have covered other sector peers’ IRC metrics via similar articles. I plan on continuing to cover this specific topic for the fourteen other BDC peers I currently cover.

Discussion of ORCC’s RIC Classification per the IRC:

As a BDC, ORCC elects to be treated as a RIC under Subchapter M of the IRC. To continue to qualify annually as a RIC, the IRC requires ORCC to meet certain “source-of-income” and “asset diversification” requirements. These requirements are beyond the scope of this article and will not be mentioned again. There is one specific provision which pertains to ORCC’s dividend sustainability that should be discussed. As a RIC, ORCC is required to distribute to shareholders at least 90% of the company’s ICTI and net capital gains (in excess of any capital loss carryforward balance; if applicable) in any given tax year in order to be eligible for the tax benefits allowed in regards to this type of entity. This is a very similar taxation treatment when compared to a real estate investment trust (“REIT”) entity. If ORCC qualifies to be taxed as a RIC, the company avoids double taxation by being allowed to take a dividends paid deduction at the corporate level.

Several book to tax adjustments need to be determined to properly convert ORCC’s earnings per share(“EPS”) figure to the company’s ICTI. Once ORCC’s ICTI is known, one adds all net capital gains to this figure (if a capital loss carryforward balance does not exist). Net capital gains consist of realized short-term net capital gains in excess of realized long-term net capital losses for each tax year. While some sector peers continue to have a material capital loss carryforward balance from prior years, ORCC currently is one of several BDC exceptions. ORCC continues to “hover” between not having a capital loss carryforward balance at the end of each calendar year and having a minor carryforward balance. This is important to understand when TEST 3 is analyzed later in the article.

After this calculation, ORCC’s net ICTI figure is known which is also known as the company’s annual distribution requirement (“ADR”). Regarding ORCC’s ADR, the company has an additional option available if it fails to distribute 90% of its net ICTI within a given year. ORCC is allowed to carryover its net ICTI into the following year and pay an excise tax of 4% regarding the current year’s UTI. However, ORCC needs to distribute the company’s remaining net ICTI for a given tax year through declared dividends prior to the filing of its tax return for that applicable year. This is also known as the spillback provision which ORCC will likely continue to utilize, to some extent, in the future. If ORCC fails to comply with this provision, excluding one extraordinary measure that is not applicable to ORCC (hence deemed unnecessary to discuss within this particular article), the company would be declassified as a RIC per the IRC. If this were to occur, all of ORCC’s net ICTI would be subject to taxation at regular corporate tax rates at the company level.

Two Main Factors ORCC Considers Regarding Dividend Distributions:

I believe ORCC’s dividend is mainly based on the following two factors:

First Factor: Intend to cover the company’s dividend payout level with NII

Second Factor: Intend to cover the company’s annual dividend payout level with net ICTI/cumulative UTI (makes sense due to ORCC’s recent declaration of special periodic dividends)

The first factor will focus on ORCC’s NII and be analyzed via TEST 1. The second factor will focus on ORCC’s net ICTI and cumulative UTI and be analyzed via TEST 2 and TEST 3, respectively. Readers should understand these distinctions as the three tests are provided below.

First Main Factor – Intend to Cover the Company’s Dividend Payout Level with NII:

To test management’s first main factor, I believe it is necessary to analyze and discuss ORCC’s prior annual NII figures to see if the company’s dividend distributions were covered. I also believe it is desirable to analyze and discuss my projected ORCC NII figure for 2019 to see if the company’s projected dividend distributions over the foreseeable future will be covered.

Table 1 below shows ORCC’s reported annual NII from 2016-2018. Table 1 also shows my projected ORCC NII for 2019 (thus my projection for the fourth quarter of 2019). This table compares ORCC’s NII figure to the company’s dividend distributions figure showing the annual underpayment (overpayment).

Table 1 – ORCC Annual NII Analysis (Based on GAAP)

(Source: Table created entirely by myself, partially using ORCC data obtained from the SEC’s EDGAR Database)

Table 1 will be the main source of information as TEST 1 is analyzed below. Now let us begin ORCC’s dividend sustainability analysis.

TEST 1 – Annual NII Versus Annual Distributions Analysis:

  • See Red References “C, D, E, (D / C)” in Table 1 Above Next to the December 31, 2019 Column

Using Table 1 above as a reference, I take ORCC’s annual “NII” figure (see red reference “C“) and subtract this amount by the annual “distributions from NII” figure (see red reference “D“). If ORCC’s red reference “C” is greater than the company’s red reference “D”, then ORCC technically had enough annual NII to pay out the company’s dividend distributions for a particular year. If ORCC’s red reference “C” is less than the company’s red reference “D”, then the company technically did not have enough annual NII to pay out its dividend distributions for a particular year.

TEST 1 – Analysis and Results:

Still using Table 1 above as a reference, ORCC reported annual NII of $9.0, $93.8, and $245.5 million for 2016, 2017, and 2018, respectively. In comparison, ORCC had annual dividend distributions of ($2.1), ($100.5), and ($232.1) million, respectively. When calculated, ORCC had an annual underpayment (overpayment) of NII of $6.9, ($6.8), and $13.4 million (rounded) for 2016, 2017, and 2018, respectively. This calculates to an annual dividend distributions payout ratio of 23%, 107%, and 94.5%, respectively (see red reference “(D / C)”). As such, ORCC had a notable underpayment (less than 80% payout) during 2016, a minor overpayment (at or greater than 105% but less than 110% payout) during 2017, and a minor underpayment (at or greater than 90% but less than 95% payout) during 2018. When combined, over the span of three years, ORCC had a dividend distributions payout ratio of 96% which I classify as a very minor underpayment (at or greater than 95% but less than 100% payout).

Moving to 2019, ORCC reported NII of $96.0, $119.6, and $137.6 million for the first, second, and third quarters of 2019, respectively. I am projecting ORCC will report NII of $142.0 million for the fourth quarter of 2019. This projected minor NII increase is directly associated with the continued increase of ORCC’s investment portfolio partially offset by the recent continued decrease of the London Interbank Offered Rate (“LIBOR”) which has negatively impacted ORCC’s floating-rate debt investments (decrease in effective interest rates). This has negatively impacted most BDC investment portfolios to varying degrees. This should be considered a “cautious” estimate. When combined, I am projecting ORCC will report annual NII of $495.5 million for 2019. In comparison, I am projecting ORCC will have dividend distributions of ($476.5) million. When calculated, I am projecting ORCC will have an annual underpayment of NII of $19.0 million for 2019. This calculates to an annual dividend distributions payout ratio of 96%. This projection would equate to a very minor underpayment of NII.

In my opinion, considering TEST 1 on a “standalone basis”, this evidence supports the notion there could be some slight pressure for ORCC to slightly reduce the company’s dividend per share rate heading into 2020 (since I am only projecting a very minor underpayment of NII for 2019). However, TEST 1 does not specifically account for ORCC’s net ICTI figures/cumulative UTI balances (based on IRC methodologies). As will be discussed below, SOLELY looking at ORCC’s NII as a dividend sustainability metric is a preliminary “rush to judgement” and has led, and will continue to lead, to inaccurate projections (pointing this out for other contributors and market participants). As such, TEST 2 and TEST 3 will now be performed to gain further clarity on ORCC’s dividend sustainability.

Second Main Factor – Intend to Cover the Company’s Annual Dividend Payout Level with Net ICTI/Cumulative UTI:

To fully understand and accurately project a BDC’s dividend sustainability, readers must understand the subtle, yet identifiable differences between a company’s NII and net ICTI figures/cumulative balances. Simply put, due to temporary and permanent tax/book differences, there continues to be a “de-coupling” of ORCC’s NII and net ICTI which gradually widens the gap between the company’s cumulative undistributed NII (deficit) and cumulative UTI balances. As such, readers/contributors not considering IRC methodologies greatly lower the probability of providing accurate projections over a prolonged period of time. Since this is such an important concept to understand, let us briefly discuss this distinction.

NII is a Generally Accepted Accounting Principles (“GAAP”) figure which is based on the accrual method of accounting. ICTI and net ICTI are IRC figures which are “generally” based on the cash method of accounting (some exceptions to this notion [for instance payment-in-kind income and differing depreciation/amortization time tables] but I am keeping it simple for this discussion). Income and expense recognition of certain accounting transactions differ between GAAP and the IRC (book versus tax accounting treatments). A majority of ORCC’s book to tax differences (either temporary or permanent in nature) consist of the following: 1) deferred financing fees on loans and deferred offering costs in relation to equity offerings; 2) unrealized investment gains (losses) per GAAP (non-realizable per the IRC); 3) expenses not currently deductible; and 4) income tax (provision) benefit of certain subsidiaries. There are several additional book to tax adjustments that ORCC periodically recognizes. However, for purposes of this “free to the public” article, further discussion of these additional adjustments is unwarranted.

To test ORCC’s second factor, I believe it is necessary to analyze and discuss the company’s historical annual net ICTI figures to see if the company’s annual dividend distributions were being covered. This will lead to a better understanding of the overall trends regarding this particular metric and possible pitfalls that may arise in the future. This includes ORCC using the company’s cumulative UTI balance on any annual net ICTI overpayments. I also believe it is desirable to analyze and discuss my projected ORCC annual net ICTI figure for 2019 to see if the company’s projected dividend distributions will be covered.

By using this methodology, I have consistently provided highly accurate dividend projections within the BDC sector over multiple years (including the most accurate projections on Seeking Alpha). Table 2 below shows ORCC’s annual net ICTI for 2016-2018 and my projection for 2019.

Table 2 – ORCC Annual Net ICTI and Cumulative UTI Analysis (Based on IRC Methodologies)

RCC Annual Net ICTI and Cumulative UTI Analysis (Based on IRC Methodologies)(Source: Table created entirely by myself, partially using ORCC data obtained from the SEC’s EDGAR Database)

All figures within Table 2 above for 2016-2018 are checked and verified, either directly or through reconciliations, to various spreadsheets and data from ORCC’s supporting documentation (excludes all ratios). Table 2 will be the main source of information as TEST 2 and TEST 3 are analyzed below.

TEST 2 – Annual Net ICTI Versus Annual Distributions Analysis:

  • See Red References “E, F, G, (F / E)” in Table 2 Above Next to the December 31, 2019 Column

Using Table 2 above as a reference, I take ORCC’s annual “net ICTI” figure (see red reference “E”) and subtract this amount by the annual “distributions from net ICTI” figure (see red reference “F”). If red reference “E” is greater than red reference “F”, then ORCC technically had enough annual net ICTI to pay out the company’s dividend distributions for that particular period of time. Any excess net ICTI left over, after accounting for ORCC’s dividend distributions, is added to the company’s cumulative UTI balance. This particular balance will be analyzed within TEST 3 later in the article. If red reference “E” is less than red reference “F”, then ORCC technically did not have enough annual net ICTI to pay out the company’s dividend distributions for a particular year and must use a portion of the cumulative UTI balance to help with the overpayment.

TEST 2 – Analysis and Results:

Still using Table 2 above as a reference, ORCC had annual net ICTI of $11.1, $98.7, and $257.8 million for 2016, 2017, and 2018, respectively. In comparison, ORCC had annual dividend distributions of ($2.1), ($100.5). and ($232.1) million, respectively. When calculated, ORCC had an annual underpayment (overpayment) of net ICTI of $9.0, ($1.8), and $25.8 million for 2016, 2017, and 2018, respectively (see red reference “(E – F) = G”). This calculates to an annual dividend distributions payout ratio of 19%, 102%, and 90%, respectively (see red reference “(F / E)”). As such, ORCC had a notable net ICTI underpayment during 2016, a very minor overpayment (greater than 100% but less than 105% payout) during 2017, and a minor underpayment during 2018. When combined, over the span of three years, ORCC had a dividend distributions payout ratio of 91% which I classify as a minor underpayment.

Moving to 2019, I am projecting ORCC will report annual net ICTI of $510.4 million. In comparison, I am projecting ORCC will have annual dividend distributions of ($476.5) million. When calculated, I am projecting ORCC will have an annual underpayment of net ICTI of $33.9 million for 2019. This calculates to an annual dividend distributions payout ratio of 93%. Moving to 2020 (not shown within Table 2), I am projecting ORCC will have an annual dividend distributions payout ratio range of 94%-102%. This projection would equate to a fairly consistent, minor underpayment-very minor overpayment of net ICTI. This projected range also considers ORCC has already declared special periodic dividends totaling $0.32 per share for 2020 (a consistent quarterly $0.08 per share). This is in additional to ORCC’s “regular” quarter dividend that has yet to be declared for 2020.

In my opinion, when looking at TEST 2 on a standalone basis, I believe readers should view ORCC’s projected minor-very minor annual underpayment of net ICTI for 2019-2020 as a somewhat encouraging sign for a steady quarterly dividend per share rate during 2020 (including the special periodic dividends already declared through the fourth quarter of 2020). Let us now take this dividend sustainability analysis a step further and perform TEST 3.

TEST 3 – Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio Analysis:

  • See Red References “I, K, (I / K)” in Table 2 Above Next to the December 31, 2019 Column

Once again using Table 2 above as a reference, I take ORCC’s “cumulative UTI” figure (see red reference “I”) and divide this amount by the company’s “outstanding shares of common stock” figure (see red reference “K“). From this calculation, ORCC’s “cumulative UTI coverage of outstanding shares of common stock ratio” is obtained (see red reference “(I / K)”). The higher this ratio is, the more positive the results regarding ORCC’s future dividend sustainability. Simply put, this ratio shows the amount of cumulative UTI covering the number of outstanding shares of common stock for that specified point in time. This specific metric is highly relevant to ORCC as the company has rapidly expanded the company’s investment portfolio through a combination of issuing new debt and raising equity/capital. This specific metric shows if ORCC has been able to keep growing the company’s cumulative UTI balance when factoring in the fact that its outstanding shares of common stock have also rapidly increased.

TEST 3 – Analysis and Results:

Still using Table 2 above as a reference, ORCC had a cumulative UTI balance of $9.0, $7.2, and $32.6 million at the end of the fourth quarter of 2016, 2017, and 2018, respectively. Due to ORCC’s three-year underpayment of net ICTI (as discussed in TEST 2 earlier), the company’s cumulative UTI balance increased from $0 as of 12/31/2015 to $32.6 million as of 12/31/2018. ORCC had 45.8, 98.0, and 216.2 million outstanding shares of common stock, respectively. When calculated, ORCC had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.20, 0.07, and 0.15 at the end of the fourth quarter of 2016, 2017, and 2018, respectively. Simply put, ORCC was able to maintain a fairly consistent cumulative UTI ratio during 2016-2018 which should be seen as a slightly positive catalyst/trend. However, it should be noted these figures were relatively low when compared to some BDC peers.

Moving to 2019, I am projecting ORCC will have a cumulative UTI balance of $66.5 million at the end of the fourth quarter of 2019. I am projecting ORCC will have 400.0 million outstanding shares of common stock (assumes ORCC’s rapid expansion slowed down during the fourth quarter of 2019). When calculated, I am projecting ORCC will have a cumulative UTI coverage of outstanding shares of common stock ratio of 0.17 at the end of the fourth quarter of 2019. I consider this a minor (at or greater than 0.10 but less than 0.25) cumulative UTI balance. Simply put, I believe ORCC’s ratio as of 12/31/2019 will be at a somewhat “cautious” level.

Moving to 2020 (not show in Table 2), I am projecting ORCC will have a cumulative UTI coverage of outstanding shares of common stock ratio range of 0.10-0.20 at the end of the fourth quarter of 2020. Simply put, I believe ORCC’s ratio as of 12/31/2020 will remain at a somewhat cautious level and continue the trend experienced over the past several years. This assumes a slight increase in credit risk when it comes to ORCC’s debt investment portfolio. Due to ORCC’s recent rapid expansion, a majority of debt investments are relatively new. At the time of most loan originations, credit risk is low and can rise overtime if there is poor operating performance/efficiency. This is always an inherent risk when it comes to investing in high-yield bonds/leveraged loans.

In my opinion, considering TEST 3 on a standalone basis, the evidence provided above helps support ORCC’s fairly steady annual dividend per share rate over the past several years (some could argue a slight increase) which should likely continue through at least 2020. This also supports the recent declaration of special periodic dividends totaling $0.04 and $0.32 per common share for 2019 and 2020, respectively.

Conclusions Drawn

To sum up the information in this article, three dividend sustainability tests were performed on ORCC. The first test was based on ORCC’s NII figures which are based on GAAP. The next two tests were based on ORCC’s net ICTI figures which are based on IRC methodologies. TEST 1 provided the following information in regards to ORCC’s annual NII for the prior three years:

ORCC’s NII Payout Ratio for 2016, 2017, and 2018, Respectively: 23%, 107%, and 94.5%

TEST 1 also provided the following information in regards to my projection of ORCC’s annual NII for 2019:

ORCC’s Projected NII Payout Ratio for 2019: 96%

In my opinion, considering TEST 1 on a standalone basis, this evidence supports the notion there could be some slight pressure for ORCC to slightly reduce the company’s dividend per share rate heading into 2020 (since I am only projecting a very minor underpayment of NII for 2019). However, TEST 1 does not specifically account for ORCC’s net ICTI figures/cumulative UTI balances (based on IRC methodologies). SOLELY looking at ORCC’s NII as a dividend sustainability metric is a preliminary rush to judgement and has led, and will continue to lead, to inaccurate projections (pointing this out for other contributors and market participants). As such, to gain further clarity, TEST 2 was then performed which provided the following information in regards to ORCC’s annual net ICTI for the prior three years:

ORCC’s Net ICTI Payout Ratio for 2016, 2017, and 2018, Respectively: 19%, 102%, and 90%

TEST 2 also provided the following information in regards to my projection of ORCC’s net ICTI for 2019-2020:

ORCC’s Projected Net ICTI Payout Ratio for 2019 and 2020, Respectively: 94% and 94%-102%

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support ORCC’s fairly steady annual dividend per share rate over the past several years (some could argue a slight increase) which should likely continue through at least 2020. This projected range also considers ORCC has already declared special periodic dividends totaling $0.32 per share for 2020 (a consistent quarterly $0.08 per share).

Finally,TEST 3 provided the following information in regards to ORCC’s cumulative UTI coverage of outstanding shares of common stock ratio at the end of the fourth quarter of the prior three years:

ORCC’s Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 12/31/2016, 12/31/2017, and 12/31/2018, Respectively: 0.20, 0.07, and 0.15

TEST 3 also provided the following information in regards to my projection of ORCC’s cumulative UTI coverage of outstanding shares of common stock ratio for 2019-2020:

ORCC’s Projected Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 12/31/2019 and 12/31/2020, Respectively: 0.17 and 0.10-0.20

In my opinion, considering TEST 3 on a standalone basis, the evidence provided above helps support ORCC’s fairly steady annual dividend per share rate over the past several years (some could argue a slight increase) which should likely continue through at least 2020. This also supports the recent declaration of special periodic dividends totaling $0.04 and $0.32 per common share for 2019 and 2020, respectively.

Therefore, when looking at the results from TEST 1, TEST 2, and TEST 3, I have concluded the probability of ORCC being able to basically maintain-slightly increase the company’s quarterly dividend per share rate during 2020 is relatively high (70%). Again, ORCC has already declared special periodic dividends totaling $0.32 per share for 2020 (a consistent quarterly $0.08 per share) which has slightly lowered the probability of ORCC’s quarterly dividend sustainability (by 10%). As such, I am projecting ORCC will declare the following quarterly dividends for 2020:

Dividend for Q1 2020 (Paid in April 2020): $0.30-$0.32 per share

Dividend for Q2 2020 (Paid in July 2020): $0.30-$0.32 per share

Dividend for Q3 2020 (Paid in October 2020): $0.30-$0.34 per share

Dividend for Q4 2020 (Paid in January 2021): $0.30-$0.34 per share

Special Periodic Dividends Already Declared for 2020: $0.32 per share

My BUY, SELL, or HOLD Recommendation

From the analysis provided above, including additional factors not discussed within this article, I currently rate ORCC as a SELL when the company’s stock price is trading at or greater than a 20% premium to the mean of my projected ORCC NAV as of 12/31/2019 range ($15.15 per share), a HOLD when trading at greater than a 10% premium but less than a 20% premium to the mean of my projected ORCC NAV as of 12/31/2019 range, and a BUY when trading at or less than a 10% premium to the mean of my projected ORCC NAV as of 12/31/2019 range.

Therefore, I currently rate ORCC as a BUY. As such, I currently believe ORCC is undervalued from a stock price perspective. My current price target for ORCC is approximately $18.20 per share. This is currently the price where my recommendation would change to a SELL. The current price where my recommendation would change to a HOLD is approximately $16.65 per share.

I recently wrote the following sector comparison articles which provided various metrics between fourteen BDC peers (excluding ORCC since I only began coverage of this stock on 1/1/2020):

Ares Capital’s NAV, Dividend, And Valuation Vs. 13 BDC Peers (Post Q3 2019 Earnings, Including Current Price Target)

Ares Capital’s NAV, Dividend, And Valuation Vs. 14 BDC Peers – Part 2 (Post Q3 2019 Earnings)

I would point out the REIT Forum is only one of possibly two Marketplace services (or publicly accessible forum on the internet) that provides BDC projected NAVs throughout an entire quarter (possibly even the only Marketplace Service regarding these specific projections). Furthermore, I believe my historical “track record”/accuracy regarding projected NAVs has surpassed most professional analysts within the BDC sector on a consistent basis. I believe this should “count for something” when it comes to overall reliability and value.

Final Note: Each investor’s BUY, SELL, or HOLD decision is based on one’s risk tolerance, time horizon, and dividend income goals. My personal recommendation will not fit each reader’s current investing strategy. The factual information provided within this article is intended to help assist readers when it comes to investing strategies/decisions.

Recent/Current BDC Sector Stock Disclosures

On 9/6/2017, I re-entered a position in Prospect Capital Corp. (PSEC) at a weighted average purchase price of $6.765 per share. On 10/16/2017 and 11/6/2017, I increased my position in PSEC at a weighted average purchase price of $6.285 and $5.66 per share, respectively. When combined, my PSEC position has a weighted average purchase price of $6.077 per share. This weighted average per share price excludes all dividends received/reinvested. I currently have a HOLD recommendation on PSEC (close to my BUY range though).

On 6/5/2018, I initiated a position in TPG Specialty Lending Inc. (TSLX) at a weighted average purchase price of $18.502 per share. On 6/14/2018, I increased my position in TSLX at a weighted average purchase price of $17.855 per share. My second purchase was approximately double the monetary amount of my initial purchase. When combined, my TSLX position had a weighted average purchase price of $18.071 per share. This weighted average per share price excluded all dividends received/reinvested. On 11/12/2019, I sold my entire TSLX position at a weighted average sales price of $21.875 per share. This calculates to a weighted average realized gain and total return of 21.1% and 35.7%, respectively. I held this position for approximately 17 months. Each TSLX trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on TSLX (very close to my SELL range though).

On 10/12/2018, I initiated a position in Ares Capital Corp. (ARCC) at a weighted average purchase price of $16.40 per share. On 12/10/2018, 12/18/2018, and 12/21/2018, I increased my position in ARCC at a weighted average purchase price of $16.195, $15.305, and $14.924 per share, respectively. When combined, my ARCC position has a weighted average purchase price of $15.293 per share. This weighted average per share price excludes all dividends received/reinvested. Each ARCC trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on ARCC.

On 10/12/2018, I initiated a position in Solar Capital Corp. (SLRC) at a weighted average purchase price of $20.655 per share. On 12/18/2018, I increased my position in SLRC at a weighted average purchase price of $19.66 per share, respectively. When combined, my SLRC position has a weighted average purchase price of $19.909 per share. This weighted average per share price excludes all dividends received/reinvested. Each SLRC trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on SLRC.

On 3/13/2019, I initiated a position in Gladstone Investment Corp. (GAIN) at a weighted average purchase price of $11.625 per share. On 6/6/2019, I increased my position in GAIN at a weighted average purchase price of $11.085 per share. When combined, my GAIN position had a weighted average purchase price of $11.257 per share. This weighted average per share price excluded all dividends received/reinvested. On 11/11/2019, I sold my entire GAIN position at a weighted average sales price of $13.78 per share. This calculates to a weighted average realized gain and total return of 22.4% and 28.3%, respectively. I held this position for approximately 7 months. Each GAIN trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on GAIN (very close to my SELL range though).

On 10/2/2019, I re-entered a position in NEWTEK Business Services Corp. (NEWT) at a weighted average purchase price of $21.635 per share. On 10/7/2019, I increased my position in NEWT at a weighted average purchase price of $20.95 per share. When combined, my NEWT position has a weighted average purchase price of $21.121 per share. This weighted average per share price excludes all dividends received/reinvested. Each NEWT trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on NEWT.

Final Note: All trades/investments I have performed over the past several years have been disclosed to readers in real time (that day at the latest) via the StockTalks feature of Seeking Alpha (which cannot be changed/altered). Through this resource, readers can look up all my prior disclosures (buys/sells) regarding all companies I cover here at Seeking Alpha (see my profile page for a list of all stocks covered). Through StockTalk disclosures, at the end of December 2019 I had an unrealized/realized gain “success rate” of 95.8% and a total return (includes dividends received) success rate of 97.9% out of 48 total past and present positions (updated monthly; multiple purchases/sales in one stock count as one overall position until fully closed out). I have yet to realize a “total loss” in any of my past positions. Both percentages experienced a minor increase in October and November 2019 due to the continued reversal of the previous sell-off within the mREIT sector; mainly due to a partial easing of fears of narrowing net spreads and higher prepayments.I encourage other Seeking Alpha contributors to provide real time buy and sell updates for their readers which would ultimately lead to greater transparency/credibility.

I am currently “teaming up” with Colorado Wealth Management to provide intra-quarter CURRENT BV per share projections on all 21 mREIT stocks I currently cover.  These very informative (and “premium”) projections are provided through Colorado’s S.A. Marketplace service.  I also provide “rapid-fire” mREIT quarterly earnings articles. In late October 2019, I have expanded my services via additional data/analytics, continuous sector recommendations (including ranges), and exclusive mREIT articles. In late November 2019, I have expanded my services to include BDC data/analytics, continuous sector recommendations (including ranges), and exclusive articles.

Disclosure: I am/we are long ARCC, GAINM, NEWT, PSEC, SLRC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I currently have no position in ORCC, BDCL, BDCS, BIZD, GAIN, or TSLX. Depending on near-term stock price movements, I may initiate a position in ORCC in the near future.

Colorado Wealth Management currently has no positions in any of the stocks mentioned within this article.

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