{"id":15875,"date":"2025-05-29T08:11:27","date_gmt":"2025-05-29T08:11:27","guid":{"rendered":"https:\/\/finderica.com\/?p=15875"},"modified":"2025-05-29T08:11:27","modified_gmt":"2025-05-29T08:11:27","slug":"can-saratoga-investment-corp-maintain-its-12-yield","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=15875","title":{"rendered":"Can Saratoga Investment Corp. Maintain Its 12% Yield?"},"content":{"rendered":"
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You may not have heard of Saratoga Investment Corp<\/strong> (NYSE: SAR), a small cap business development company (BDC), but its shareholders undoubtedly love its 12% yield.<\/p>\n

But will that 12% yield stick around long enough to put the company on more investors\u2019 radar?<\/p>\n

The New York-based BDC lends money to businesses that aren\u2019t able to get bank loans. It lends to businesses in a variety of sectors including healthcare, technology, consumer services, and more.<\/p>\n

Because it\u2019s a BDC, the measure of cash flow that we use is net interest income, or NII.<\/p>\n

Its latest fiscal year, which ended in February, saw a slight setback when NII declined 7%. That was after several years of strong growth.<\/p>\n

In the current fiscal year, NII is forecast to grow 19%. Even though that\u2019s a positive, the Safety Net Model is a stern taskmaster and doesn\u2019t stand for disappointment. The decline in the last fiscal year costs Saratoga a one-grade penalty.<\/p>\n

\"Chart:<\/a><\/p>\n

<\/a>In the last fiscal year, Saratoga paid shareholders $40.7 million in dividends for a payout ratio of 77%. This fiscal year, the payout ratio is forecast to dip to 74%. BDCs are only penalized on payout ratios above 100%. So Saratoga\u2019s payout ratio is healthy.<\/p>\n

Its dividend history is decent. The only hiccup was in 2020, during the pandemic, when it reduced the dividend from $0.56 to $0.40. Other than that, not including special dividends, the BDC has raised the payout every year.<\/p>\n

Earlier this year, the company switched to a monthly dividend from quarterly. It now pays $0.25 per share each month, which comes to $3.00 per year or a 12.3% yield.<\/p>\n

The cut in 2020 hurts the safety rating \u2013 as does the decline in NII last year. Should fiscal 2026\u2019s NII come in above last year\u2019s $53 million as expected, that penalty for the decrease in cash flow will go away. So, it\u2019s very possible Saratoga Investment Corp. will get an upgrade next year.<\/p>\n

But until it shows that NII has in fact grown in the current year, the dividend safety rating expresses that there is moderate risk to the dividend.<\/p>\n

Dividend Safety Rating: C<\/strong><\/p>\n

\"Dividend<\/p>\n<\/p><\/div>\n