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Posts Tagged ‘private equity funds’

CSWC Announces $2.75 Special Dividend – Stock Trades at 49% Discount to NAV

The Capital Southwest Corporation (CSWC) board of directors has declared a cash dividend in the amount of $2.75 per share of common stock. This special dividend is a yield of 2.5% based on the current stock price. The dividend is payable on March 28, 2013 to shareholders of record on March 15, 2013.

Capital Southwest Corporation is a public investment firm specializing in venture capital and private equity investments in small and medium sized businesses.  CSWC has a market cap of $421 million and is cheaply valued with a trailing PE of only 6 compared to an industry average PE of 20.

Capital Southwest Corporation reported total net assets at December 31, 2012 of $628,089,815 equivalent to $165.36 per share.  CSWC shares are currently trading at $111 which is a 49% discount to the NAV at year end. 

The market clearly misunderstands this stock as it should not be trading at such a discount to NAV.  In addition, CSWC has NO long-term debt on its books.  CSWC has an equity summary score of 7.2 out of 10 for a Bullish outlook.

Assuming reinvestment of all dividends and tax credits on retained long-term capital gains, the December 31, 2012net asset value was 18.4% greater than the March 31, 2012net asset value of $167.45per share and 34.9% above the December 31, 2011net asset value of $146.95per share. It is important to note that during the nine months ended December 31, 2012, CSWC distributed $66,825,782 or $17.59 per share of capital gains dividends and $3,025,032 or $0.80 per share in ordinary dividends to our shareholders.

On January 30, 2013 Capital Southwest Corporation announced that Capital Southwest Venture Corporation, a wholly-owned subsidiary of CSWC sold its 9,317,310 shares of common stock of Heelys, Inc. to Sequential Brands Group, Inc. pursuant to the merger of Heelys into a wholly-owned subsidiary of Sequential.  The Merger closed on January 24, 2013.

The sale of CSVC’s 9,317,310 shares of Heelys’ common stock generated cash proceeds of $20,963,948 and a capital gain of $20,861,458 or $5.49 per share, based on the 3,800,393 shares of issued and outstanding shares of CSWC. The CSWC Board has approved a partial distribution of the capital gain proceeds, in the amount of $2.75 per share or approximately $10,451,000.

New Listing of Business Development Companies (BDC) for Monthly Income

Business Development Companies (BDCs) allow public shareholders access to portfolios that resemble private-equity funds.  However, BDCs are not for the faint of heart.  Most offer liquidity, income, upside potential, professional management and the opportunity to invest in some attractive areas.  But there are significant risks includinghigh fees, leverage, conflictsof interest and risky underlying investments, to name a few.

Most BDCs have Web sites where you can find information on types of investments,advisors, leverage employed, expense and payout ratios, distributions, and other important data.  All filedocuments with the SEC.  Needless to say, you should read very carefully all of the filing materials, including theprospectuses, proxy statements, annual and semi-annual reports as well as their 10-Ks, 10-Qs and 8-Ks (detailing material events).

Take the time to analyze and identify those you want to own at the right price. Then when the time is right and the shares are trading near net asset value, make your move. While it’s ego gratifying to invest with the big guys, don’t pay up for mediocre performance or greedy managers.

Here is a listing of BDCs with company information.  In my opinion, a high yield should indicate a stable stock so I like BDCs with a low volatility to confirm it is trading well.  I prefer BDCs with average volatility below 30% and find those below 20% as a great indicator.  Of course, it’s the yield and monthly income we are looking for in a BDC and maybe a little capital gain.

Listing of BDCs with high yields

Click to enlarge

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