Gladstone Capital Corporation (NASDAQ: GLAD) and Alcentra Capital Corp. (NASDAQ:ABDC) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, earnings, risk, profitability, analyst recommendations, institutional ownership and valuation.
Gladstone Capital Corporation pays an annual dividend of $0.84 per share and has a dividend yield of 9.1%. Alcentra Capital Corp. pays an annual dividend of $1.36 per share and has a dividend yield of 12.7%. Gladstone Capital Corporation pays out 62.2% of its earnings in the form of a dividend. Alcentra Capital Corp. pays out -1,700.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Alcentra Capital Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a breakdown of current recommendations and price targets for Gladstone Capital Corporation and Alcentra Capital Corp., as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Gladstone Capital Corporation||1||1||1||0||2.00|
|Alcentra Capital Corp.||0||3||2||0||2.40|
Gladstone Capital Corporation presently has a consensus price target of $9.08, suggesting a potential downside of 1.38%. Alcentra Capital Corp. has a consensus price target of $13.50, suggesting a potential upside of 26.40%. Given Alcentra Capital Corp.’s stronger consensus rating and higher possible upside, analysts plainly believe Alcentra Capital Corp. is more favorable than Gladstone Capital Corporation.
Institutional & Insider Ownership
14.5% of Gladstone Capital Corporation shares are owned by institutional investors. Comparatively, 31.5% of Alcentra Capital Corp. shares are owned by institutional investors. 6.5% of Gladstone Capital Corporation shares are owned by company insiders. Comparatively, 5.0% of Alcentra Capital Corp. shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.
Volatility and Risk
Gladstone Capital Corporation has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500. Comparatively, Alcentra Capital Corp. has a beta of 0.74, suggesting that its share price is 26% less volatile than the S&P 500.
This table compares Gladstone Capital Corporation and Alcentra Capital Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Gladstone Capital Corporation||85.01%||9.88%||6.26%|
|Alcentra Capital Corp.||-2.77%||11.13%||6.86%|
Earnings and Valuation
This table compares Gladstone Capital Corporation and Alcentra Capital Corp.’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Gladstone Capital Corporation||N/A||N/A||N/A||$1.35||6.82|
|Alcentra Capital Corp.||N/A||N/A||N/A||($0.08)||-133.50|
Alcentra Capital Corp. is trading at a lower price-to-earnings ratio than Gladstone Capital Corporation, indicating that it is currently the more affordable of the two stocks.
Alcentra Capital Corp. beats Gladstone Capital Corporation on 8 of the 12 factors compared between the two stocks.
About Gladstone Capital Corporation
Gladstone Capital Corporation is a closed-end, non-diversified management investment company, operating as a business development company (BDC). The objectives of the Company are to achieve and grow current income by investing in debt securities of established businesses that it believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its outstanding indebtedness and make distributions to stockholders that grow over time, and to provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities of established businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. The Company is focused on investing in lower middle-market companies in the United States. It has investments in south, Midwest, west and northeast of the United States. Its portfolio allocation includes debt investments and equity investments.
About Alcentra Capital Corp.
Alcentra Capital Corporation is a specialty finance company that operates as a non-diversified, closed-end management investment company. The Company operates as a business development company and a regulated investment company. It provides customized debt and equity financing solutions to lower middle-market companies, which are companies having annual earnings, before interest, taxes, depreciation and amortization of between $5 million and $15 million, and/or revenues of between $10 million and $100 million. Its investments range in size from $5 million to $15 million. Its investment objective is to generate both current income and capital appreciation primarily by making direct investments in lower middle-market companies in the form of senior debt, unitranche, second lien, subordinated debt and, to a lesser extent, senior debt and minority equity investments. Its investment focus is to make loans to, and selected equity investments in, privately-held lower-middle-market companies.
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