FS Investment Corporation’s (FSIC) “Neutral” Rating Reiterated at National Securities
National Securities reissued their neutral rating on shares of FS Investment Corporation (NYSE:FSIC) in a research note published on Monday. National Securities currently has a $10.00 price target on the financial services provider’s stock.
“• For 2Q17, FSIC had adjusted NII/share of $0.19 versus our estimate of $0.20 with the quarterly dividend at a rate of $0.22275/share currently. The dividend was reduced to $0.19/share for 4Q17. We had previously modeled a cut to $0.19/share in 2Q18. Beginning in 4Q17 and lasting four quarters, FSIC’s external manager will waive 25 bps of the base fee.
• While the fee waiver is good and we are happy to see the company come to terms with reality and cut the dividend, there are a few things that disappoint us with FSIC. The dividend should have been cut a while back, given the company’s increased first lien focus, general spread compression, and the fact that the dividend was only being earned with outsized prepayment fee income. The dividend should be set at a level where it can be earned with minimal to no nonrecurring fee income. With over $16 billion in AUM across the platform, we are baffled as to why FSIC won’t just follow the rest of the industry and cut the base fee to 150 bps of gross assets permanently. The company could easily cut the base fee to even 125 bps permanently and not at all impair the platform’s ability to operate as it currently does while boosting the earnings power of FSIC significantly. Lastly, with FSIC already operates in the upper middle market (UMM) can easily establish a JV to use increased leverage on lower yielding assets in the JV structure, boosting earnings significantly.
• We are revising our 2017 adjusted NII/share estimate to $0.82 from $0.84 and our 2018 NII/share estimate to $0.85 from $0.86.,” National Securities’ analyst wrote.
FSIC has been the subject of several other reports. Zacks Investment Research lowered FS Investment Corporation from a buy rating to a hold rating in a report on Friday, May 12th. BidaskClub lowered FS Investment Corporation from a sell rating to a strong sell rating in a report on Tuesday, August 8th. Finally, Keefe, Bruyette & Woods restated a hold rating and issued a $10.00 target price on shares of FS Investment Corporation in a report on Tuesday, July 25th. One investment analyst has rated the stock with a sell rating and six have issued a hold rating to the company. The company presently has an average rating of Hold and a consensus target price of $9.80.
Shares of FS Investment Corporation (NYSE:FSIC) opened at 8.55 on Monday. FS Investment Corporation has a 12 month low of $8.30 and a 12 month high of $10.80. The firm has a 50-day moving average of $8.98 and a 200 day moving average of $9.54.
FS Investment Corporation (NYSE:FSIC) last posted its earnings results on Wednesday, August 9th. The financial services provider reported $0.19 earnings per share for the quarter, missing the Thomson Reuters’ consensus estimate of $0.20 by $0.01. FS Investment Corporation had a return on equity of 8.92% and a net margin of 59.88%. The company had revenue of $98.70 million during the quarter, compared to analyst estimates of $103.14 million. On average, equities research analysts predict that FS Investment Corporation will post $0.74 earnings per share for the current fiscal year.
The firm also recently declared a quarterly dividend, which will be paid on Tuesday, October 3rd. Stockholders of record on Wednesday, September 20th will be issued a dividend of $0.2228 per share. The ex-dividend date is Tuesday, September 19th. This represents a $0.89 dividend on an annualized basis and a dividend yield of 10.42%. FS Investment Corporation’s dividend payout ratio (DPR) is presently 87.26%.
In other news, CEO Michael C. Forman acquired 17,100 shares of the stock in a transaction dated Thursday, August 10th. The shares were acquired at an average cost of $8.41 per share, for a total transaction of $143,811.00. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is available at the SEC website. Also, CEO Michael C. Forman acquired 22,320 shares of the stock in a transaction dated Thursday, June 22nd. The shares were purchased at an average price of $8.88 per share, for a total transaction of $198,201.60. The disclosure for this purchase can be found here. Over the last quarter, insiders have bought 57,180 shares of company stock valued at $499,391. Corporate insiders own 1.00% of the company’s stock.
Hedge funds have recently added to or reduced their stakes in the stock. Amussen Hunsaker & Associates LLC purchased a new stake in FS Investment Corporation during the second quarter worth about $773,000. Strategic Wealth Advisors Group LLC purchased a new stake in FS Investment Corporation during the second quarter worth about $1,152,000. Koch Industries Inc. boosted its stake in FS Investment Corporation by 737.1% in the second quarter. Koch Industries Inc. now owns 300,044 shares of the financial services provider’s stock worth $270,000 after buying an additional 264,201 shares in the last quarter. National Asset Management Inc. boosted its stake in FS Investment Corporation by 1,255.2% in the second quarter. National Asset Management Inc. now owns 203,256 shares of the financial services provider’s stock worth $1,860,000 after buying an additional 188,258 shares in the last quarter. Finally, Nomura Holdings Inc. boosted its stake in FS Investment Corporation by 8.5% in the second quarter. Nomura Holdings Inc. now owns 1,183,645 shares of the financial services provider’s stock worth $10,847,000 after buying an additional 92,392 shares in the last quarter. Institutional investors and hedge funds own 32.30% of the company’s stock.
FS Investment Corporation Company Profile
FS Investment Corporation is an externally managed, non-diversified, closed-end management investment company. The Company’s investment objectives are to generate current income and long-term capital appreciation. Its portfolio consists primarily of investments in senior secured loans and second lien secured loans of the private United States middle market companies and subordinated loans of the private United States companies.
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