WHITE PLAINS, NY, Dec. 19, 2013 (GLOBE NEWSWIRE) -- Fifth Street Finance Corp. (Nasdaq:FSC) ("FSC") released its December 2013 newsletter today.
At FSC, we are using our sponsor relationships and investment expertise to make prudent investments with attractive risk-adjusted returns in a market characterized by compressing debt yields and increasing leverage multiples. We believe that continuing to focus on safer unitranche loans to larger borrowers is the right way to manage risk. However, this risk profile led to a lower weighted average yield on debt investments, and in turn, a lower net investment income per share. As a result, FSC's Board of Directors recently decided to lower the dividend per share to a level more consistent with current net investment income per share.
The decision to reduce the dividend was based on the view that near-term growth in earnings would be unlikely to close the previous gap between net investment income per share and the dividend that occurred over recent past quarters. The dividend change was not due to expectations for lower near-term earnings per share compared to prior levels. Previously anticipated growth in net investment income per share is now more likely expected to occur several quarters in the future. This was a result of the economic environment and our initiatives to improve earnings taking time to develop.The team at FSC is focused on generating net investment income per share that exceeds the current dividend level. This should be achievable given that FSC's weighted average yield on debt investments has stabilized, leverage is maintained near the target range and multiple initiatives previously discussed are underway to grow net investment income per share. Early in FSC's history as a public company, it was able to grow net investment income per share and the dividend per share by deploying capital at the right time. We are optimistic that success in our initiatives to grow earnings per share combined with our positioning in the current cycle should enable us to grow net investment income per share, and ideally the dividend per share, in the future.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts