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Medley Capital Offers Big Dividend Yield, Stock Soars
12/31/2012 6:28:00 PM
By: Investor's Business Daily
Medley Capital ( MCC ) stands out for its whopping 10% dividend yield.
The company, which makes loans to small and midsize businesses, went public in January 2011 and has since more than doubled its quarterly dividend to 36 cents a share.
Meanwhile, the stock soared 39% this year, far outpacing the S&P 500.
New York-based Medley is a business development company, or BDC. The industry is growing quickly by helping companies underserved by big banks to fund growth and refinance debt.
Profit for the company's fiscal first quarter through December is seen rising 29%. That's respectable, but it would mark the third straight quarter of slowing earnings growth after a 210% jump in Q2 of last year.
Revenue has risen by triple digits in the past three quarters.
Medley is in the 90-member Finance-Investment Management industry group, which was ranked No. 41 out of 197 as of Monday. Rivals within the group includeFinancial Engines ( FNGN ) .
Medley is working on a flat base with a potential buy point at 14.84. It may also be forming a handle. The stock's Relative Strength line is near a high and its Accumulation-Distribution Rating is B, indicating net positive demand for the shares.
Medley earns money from the interest on loans it makes. Its holdings consist mostly of senior secured first- or second-lien debt. Holders of first-lien secured debt get paid first if a company liquidates. Second-lien debt holders get second priority.
Medley also profits from capital appreciation on the equity it owns in companies that offer it warrants in return for funds. The warrants give Medley the option to buy a company's stock at a fixed price. As a regulated investment company, or RIC, Medley is required to pass profits on to shareholders.
Medley invests in a wide range of sectors, helping to reduce the risk of a downturn in any one. The largest investments are in the consumer finance, leasing, retail, energy and aerospace industries.
Profit is seen rising 11% in 2013 after more than doubling in 2012. Pretax profit margin was a robust 52.8% in 2012.