TPG Specialty Lending (NYSE: TSLX) and American Capital Senior Floating (NASDAQ:ACSF) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, valuation, risk, institutional ownership, analyst recommendations, earnings and profitability.
TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 7.4%. American Capital Senior Floating pays an annual dividend of $1.16 per share and has a dividend yield of 9.9%. TPG Specialty Lending pays out 71.9% of its earnings in the form of a dividend. American Capital Senior Floating pays out 37.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Capital Senior Floating is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares TPG Specialty Lending and American Capital Senior Floating’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|TPG Specialty Lending||60.77%||12.68%||7.41%|
|American Capital Senior Floating||119.98%||6.97%||3.69%|
This is a breakdown of recent ratings for TPG Specialty Lending and American Capital Senior Floating, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|TPG Specialty Lending||0||2||2||0||2.50|
|American Capital Senior Floating||0||0||0||0||N/A|
TPG Specialty Lending currently has a consensus price target of $20.25, suggesting a potential downside of 3.39%. Given TPG Specialty Lending’s higher possible upside, analysts clearly believe TPG Specialty Lending is more favorable than American Capital Senior Floating.
Volatility and Risk
TPG Specialty Lending has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500. Comparatively, American Capital Senior Floating has a beta of 1.3, indicating that its share price is 30% more volatile than the S&P 500.
Institutional & Insider Ownership
64.4% of TPG Specialty Lending shares are owned by institutional investors. Comparatively, 35.3% of American Capital Senior Floating shares are owned by institutional investors. 4.9% of TPG Specialty Lending shares are owned by company insiders. Comparatively, 0.2% of American Capital Senior Floating shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Earnings and Valuation
This table compares TPG Specialty Lending and American Capital Senior Floating’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|TPG Specialty Lending||N/A||N/A||N/A||$2.17||9.66|
|American Capital Senior Floating||N/A||N/A||N/A||$3.11||3.76|
American Capital Senior Floating is trading at a lower price-to-earnings ratio than TPG Specialty Lending, indicating that it is currently the more affordable of the two stocks.
TPG Specialty Lending beats American Capital Senior Floating on 7 of the 12 factors compared between the two stocks.
About TPG Specialty Lending
TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.
About American Capital Senior Floating
American Capital Senior Floating, Ltd. is a non-diversified closed-end investment management company. The Company’s investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve its capital. It manages a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to the United States-based companies (collectively, Senior Floating Rate Loans or SFRLs), which are referred to as leveraged loans. It invests in equity tranches of collateralized loan obligations (CLOs), which are securitized vehicles collateralized primarily by SFRLs, and it may invest in debt tranches of CLOs. In addition, it may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. It has over 80% of its assets in Senior Floating Rate Loans. The Company is managed by American Capital ACSF Management, LLC.
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