Bargain Alert: I Just Doubled My Position in a Monthly Dividend Stock Yielding 16%

The past 5 weeks person served arsenic a stern reminder that adjacent though the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) person steadily climbed implicit multidecade timelines, getting from Point A to B is filled with twists and turns.

The bully quality for opportunistic semipermanent investors is that Wall Street "hiccups" pb to terms dislocations. Late past week, 1 terms dislocation became excessively enticing, starring maine to treble my presumption successful a monthly dividend banal that's yielding 16%! Investors, accidental hullo to PennantPark Floating Rate Capital (NYSE: PFLT).

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PennantPark Floating Rate Capital is simply a concern improvement institution (BDC), which is simply a fancy mode of saying that it invests successful mostly unproven businesses (commonly known arsenic "middle-market companies"). While determination are risks that travel with investing successful middle-market companies, PennantPark's absorption squad has done a phenomenal occupation of covering its proverbial bases.

BDCs autumn into 1 of 2 camps: equity- oregon debt-focused. Although it closed retired December with $275 cardinal successful assorted preferred and communal banal positions, PennantPark's $2.33 cardinal successful indebtedness securities marque it a predominantly debt-focused BDC.

Why debt? The elemental reply is yield. Many of the middle-market companies PennantPark has financed person constricted entree to accepted loans and lines of credit. With fewer financing options disposable to these smaller businesses, PennantPark is capable to nett an above-average output connected the loans it makes. It ended 2025 with a weighted-average output connected indebtedness investments of 9.9% -- much than treble the output of semipermanent U.S. Treasury bonds.

What makes PennantPark Floating Rate Capital specified an intriguing concern tin beryllium recovered successful its name: "floating rate." Approximately 99% of its $2.33 cardinal indebtedness portfolio sports adaptable involvement rates. Although the Federal Reserve's rate-easing rhythm has weighed connected PennantPark's weighted-average output connected indebtedness securities, the lipid terms daze successful the aftermath of the Iran warfare whitethorn effect successful the cardinal slope wholly shifting its monetary policy. If this is the case, PennantPark's indebtedness portfolio is ideally positioned for success.

Management besides deserves recognition for protecting the company's invested principal. Only 0.5% of the company's portfolio astatine outgo was connected non-accrual (i.e., delinquent connected payments) arsenic of Dec. 31, 2025. Furthermore, PennantPark has dispersed its $2.61 cardinal concern portfolio crossed 160 companies (including its communal and preferred banal positions), ensuring that nary azygous concern is imperative to profitability oregon susceptible of sinking the ship.