BlackRock Kelso Capital Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes – just in case they're material to our investing thesis.

What: Shares of middle-market financier BlackRock Kelso Capital (Nasdaq: BKCC  ) are having a rough go of it today, losing as much as 12% after the company announced its fourth-quarter and year-end results this morning.

So what: BlackRock Kelso struggled to eke out a profit this quarter. The company reported a $0.03 profit whereas the consensus figure was $0.11. BlackRock Kelso cited decreased net interest income as the main reason for its significantly lowered EPS but did have a positive impact from its effort to control costs. It decided to leave its dividend untouched at $0.32 each quarter.

Now what: BlackRock Kelso was already trading at a large premium to rival MVC Capital (NYSE: MVC  ) , and investors appear to be punishing the company for not delivering on those lofty expectations. BlackRock Kelso issued 6 million new shares this quarter as well as offered another $175 million in debt and claimed it may continue to finance its operational activities through equity and debt offerings -- sort of an odd move for a company paying out a dividend in excess of 10%. My advice is to avoid being suckered in by that tempting dividend and see the business development sector for what it is: a play on net interest income. Based on this, MVC Capital has a considerably safer balance sheet that is net cash positive and trades well below book value.

Interested in more info on BlackRock Kelso Capital? Add it to your watchlist by clicking here.

Fool contributor Sean Williams does not own shares in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong.

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Related Tickers

10/20/2014 4:00 PM
BKCC $8.59 Up +0.07 +0.82%
Blackrock Kelso Ca… CAPS Rating: ***
MVC $11.13 Up +0.06 +0.54%
MVC Capital, Inc. CAPS Rating: ****

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