If you're looking for outperforming high-yield income vehicles, maybe you should check out the Gladstone family of offerings: Gladstone Investment Corp. (GAIN), Gladstone Capital Corp. (GLAD), and Gladstone Commercial Corp. (GOOD):
GAIN focuses on acquiring mature, lower middle market companies with $20 to $100 million in revenue, whereas GLAD was one of the earliest Business Development Companies and focuses on investing in loans to lower middle market businesses. GOOD is a REIT and invests in and owns net leased industrial, commercial and retail real property and selectively makes long-term industrial and commercial mortgage loans.
Earnings:
We put together trailing 12-month earnings tables as of 3/31/19 for all three companies, each of which has a different fiscal year. GAIN's fiscal year ends on 3/31/19, GLAD's ends on 9/30/19, while GOOD, the REIT in this group, reports on a calendar year basis.
GAIN had good NAV/share growth of 14.29% over the past four quarters. Its total investment income was up slightly, by 2.24%.
Its net income fell -65.66%. However, the decrease was primarily due to $13.5M in taxes on a deemed distribution of long-term capital gains, in addition to $2.1M in higher interest expense.
($Millions, except NAV/Share):
GLAD's total investment income rose 13.9%, with net investment income growth of 8.39%, whereas its NAV/share fell 5.92%, to $8.11:
GOOD had revenue growth of 9.87%, and FFO growth of 7.83%. Its net income fell -57.69% mainly due to higher non-cash depreciation and amortization costs and higher property operating expenses.
Distributions:
All three companies distribute monthly dividends and go ex-dividend next on 6/18/19, with a pay date of 6/28/19.
The dividend payout ratios are based upon net investment income - NII - for GAIN and GLAD, and Funds From Operations - FFO - for GOOD, since it's a REIT. As BDC's and a REIT, they pay out the lion's share of their earnings in distributions.
GAIN has a dividend growth rate of 6.55%, and has also paid special distributions of $.06 two times each in 2017 and 2018.
GLAD currently has the highest yield, at 9.08%, followed by GAIN, at 7.34%, and GOOD, at 7.23%:
Taxes:
GAIN's 2018 payouts were classified as 75.42% ordinary dividends, with the balance being capital gain dividends and qualified dividend income.
GLAD's 2018 payouts were classified as 97.8% ordinary dividends, with the balance being classified as qualified dividends.
GOOD's 2018 payouts were classified as 75.52% return of capital, with the balance characterized as an ordinary dividend.
They all issue 1099s at tax time.
Performance:
Santa Claus left us income investors many deeply discounted income vehicles in December 2018, and this trio was part of his bargain basem*nt satchel of joy, so much so that they've all beaten the market soundly in 2019. The story gets better, when you consider that shareholders were getting those monthly payouts yielding 7% to 9%, along with these year-to-date price gains.
However, they did show weakness over the past month, with GAIN lagging the market, while GLAD and GOOD roughly kept pace with the S&P 500.
Looking back over the past year, GOOD was the clear winner, with an 11.04% price rise, beating the market and its sister companies:
Analyst Price Targets:
Although GOOD has been the winner over the past year, it has the widest variance, 12.72%, between its current price and analysts' average price target. GAIN isn't far behind, at a 10.8% variance, whereas GLAD is now 8.11% above its $8.50 average price.
Valuations:
GAIN shows the best discount vs. its NAV/share - at a .90X valuation, whereas GLAD is selling at a premium to NAV of 1.14X. GOOD is selling at a price/FFO of 13.06, which is somewhat lower than other REIT valuations we've seen recently.
Insider Buying:
Although GLAD insiders purchased multiple shares in Q4 2018, the insiders at GOOD and GAIN have kept with that program in 2019, with GOOD's Presdent Cutlip continuing to buy shares every month. He's picked up 2500 shares, at prices ranging from $19.43 to $21.60, for an aggregate value of $51.62K between January and May 2019. He now owns 49,600 shares.
GAIN's President Dullum just bought 2000 shares on June 4, at a price of $11.10, for a total value of $22.2K, bringing his share total to 95,216.
Financials:
GAIN shows the best overall in comparison to broad industry averages, but does have a bit higher of a total debt/equity leverage ratio of .54, vs. an industry average of .38.
GLAD's ROA and ROE are roughly in line with industry averages, but its operating margin is much higher, and its debt/equity leverage is much lower.
GOOD trails its industry's averages in all categories, including debt, where it shows a much higher debt/equity ratio of 1.63X, vs. the industry average of .89X:
Options:
If you're looking for an alternative way to play one of these stocks, GOOD has the most attractive option yields.
Its December $20.00 put strike pays $.70, which is less than the expected amount of $.875 in monthly payout during this term. However, it offers you a breakeven of $19.30, which is 17.5% below GOOD's average target price of $23.40.
All tables furnished by DoubleDividendStocks.com, unless otherwise noted.
Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.
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