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Analyzing Prospect Capital’s Net Investment Income

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Aug. 18 2020, Updated 5:27 a.m. ET

Expected net investment income

Prospect Capital (PSEC) calculates its net investment income after deducting total operating expenses from the total investment income. The components of total investment income include dividend income, interest income, and other income.

Prospect Capital has a market capitalization of $2.2 billion. However, peers (XLF) Apollo Investment (AINV), Ares Capital (ARCC), and BlackRock Capital Investment (BKCC) have market capitalizations of $1.3 billion, $7.1 billion, and $0.55 billion, respectively.

Prospect Capital is expected to report net investment income (or NII) of $70 million in fiscal 1Q18, while in fiscal 4Q17, the company reported $69.6 million. Prospect Capital is not on many investors’ lists because the stock hasn’t risen much in fiscal 1Q18, and its risk profile has increased.

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Total investment income

Investors are often curious about what news related to a company could impact the stock price in the near future. One thing is for sure that when the company’s management makes an announcement related to dividend cuts, the stock price of that company is likely to fall in the near future, which could be the case for Prospect Capital.

Prospect Capital has witnessed a decline in its total investment income from $193 million in fiscal 4Q16 to $166.7 million in fiscal 4Q17. This declining trend is likely to continue, which could lead to fewer long positions.

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