MLV Cuts Prospect Capital Price Target On The Back Of Lower Dividend
In a research report published yesterday, MLV analyst Christopher Nolan maintained a Buy rating on Prospect Capital (NASDAQ:PSEC) and slightly reduced his price target to $10.75 (from $11), following the news that the company has lowered its monthly dividend starting in February 2015. The new price target represents a potential upside of 32% from where the stock is currently trading.
Nolan wrote, “We think the dividend cut was largely already priced into PSEC shares and is driven by lower investment yields, but also perhaps a management strategy to husband capital given the increased possibility of write downs in energy-related investments. While asset quality is good, with 5.1% of the investment portfolio invested in energy and a decline in oil prices, there is potential for writedowns.”
The analyst continued, “We believe the suspension of the ATM program implies slowing investment asset growth going forward. Thus, we are lowering our forward EPS estimates on lower investment asset growth. We are lowering our 12 month price target to $10.75 from $11.00 but maintaining our Buy rating. With the lower dividend PSEC shares support a 12% yield but the dividend is fully covered by our new earnings estimates.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Christopher Nolan has a total average return of -1.9% and a 33.3% success rate. Nolan has a -9.3% average return when recommending PSEC, and is ranked #2595 out of 3401 analysts.