FBR Capital Reiterates Market Perform as Capitala Finance (CPTA) Announces Dividend Reduction

September 23, 2016 8:27 AM EDT
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Price: $13.76 -0.94%

Rating Summary:
    5 Buy, 6 Hold, 0 Sell

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    Up: 30 | Down: 30 | New: 23
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FBR Capital reiterated a Market Perform rating and $15.00 price target on Capitala Finance (NASDAQ: CPTA) following the company's announcement that it has reduced its quarterly dividend. The dividend has been reduced to $0.39/ share from $0.47/share for 4Q16. This is in line with prior expectations that the dividend would be reduced to $0.40/share.

Analyst Christopher Nolan commented, "We are maintaining our EPS estimates, Market Perform rating, and $15 price target following CPTA’s announced quarterly dividend reduction. The quarterly dividend was reduced to $0.39/share from $0.47/share for 4Q16 and is consistent with our previously modeled expectations. The lower dividend, in part, reflects portfolio exits, particularly from the energy sector, and could also mean a slowing pace of new deal origination in 3Q16 given management indicated it is not chasing yield for new investments. This likely reflects competitive market pricing for lower middle market investments, but it is also positive in that it means CPTA is not pursuing yields at the cost of increased portfolio risk. Going forward, we believe the lower dividend is likely to eliminate the need for the management fee waiver. However, we believe the waiver remains in place to ensure continued full coverage of the dividend by EPS. In our view, this credibly reflects on management."

For an analyst ratings summary and ratings history on Capitala Finance click here. For more ratings news on Capitala Finance click here.

Shares of Capitala Finance closed at $14.57 yesterday.

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