It’s been a crazy week in the markets, what with 10-year Treasury yields touching the psychological 5% mark…
Fed Chair Powell saying monetary policy is “not too tight”…
And continued geopolitical escalation.
And now, it’s the last day of the trading week – so you know what that means…
A high-yield dividend play for all the income-focused investors out there…
Something you can just buy and hold to collect a steady income – the perfect “weekend stock”.
Today’s pick is an interesting one as it provides a way for you to get a high yield from the tech and life sciences sector – which typically doesn’t pay any yields whatsoever.
It also has had very stable price action, with its current price about 30% higher compared to 5 years ago…
While still being up nearly 20% compared to a year ago (meaning it’s recovered from the 2022 downturn).
This sort of price appreciation may not be the best for those looking for capital growth…
But when it comes to collecting a steady dividend that’s over 10% – it’s perfect.
Hercules Capital, Inc. (HTGC)
HTGC is a Business Development Company (BDC) – a perennial favorite here when discussing income plays on this newsletter. As a quick recap, BDCs are listed companies that invest in private small and medium-sized enterprises largely by providing financing to them. As such, they tend to benefit from rising interest rates – as long as it does not cause the quality of their credit portfolio to deteriorate.
HTGC is different from other BDCs in that it focuses on investing in companies in the tech and life sciences space that are already somewhat established. Further, it also does not take on the riskier debt slices – opting instead to provide first lien senior secured loans, which comprises over 80% of their portfolio. Returns are also boosted via convertible equity options via warrants.
Its earnings have been solid, with second-quarter figures showing a 61% and 89% yearly increase in total and net investment income, respectively. And it’s in a strong cash position, with ample cash leftover after dividend distribution.
In short, HTGC is no ordinary BDC. So, if you’re looking for a solid, well-managed income play with very respectable yields – HTGC may be a good bet.
To your wealth,
Felix @ Ace of Investing
