Great Elm Capital Corp: Insiders Love This 13% Yielder (Pays Monthly)
This High-Yield Stock Deserves a Look
If you have the habit of listening to earnings conference calls, you’ll likely have noticed that, at almost every company, management seems to be optimistic about their business. And this shouldn’t come as a surprise: why would they bad-mouth their own employer?
But the prevalent optimism from management also makes it difficult for investors to get a glimpse of how the business is really doing. The good news is, while talk is cheap, if management is willing to put their money where their mouth is, it could represent a more genuine vote of confidence.
One company that insiders seem to love is Great Elm Capital Corp (NASDAQ:GECC), a business development company (BDC) headquartered in Waltham, Massachusetts.
According to the company’s latest investor presentation, employees and affiliates of GECC’s investment manager Great Elm Capital Management, Inc own more than 20% of the BDC’s outstanding shares. (Source: “Investor Presentation – Quarter Ended September 30, 2019,” Great Elm Capital Corp, November 14, 2019.)
Other than substantial insider ownership, Great Elm Capital also deserves investor attention due to the sheer size of its payout. The company dishes out $0.996 per share of dividends to investors on an annualized basis. (Source: “Distribution Information,” Great Elm Capital Corp, last accessed December 31, 2019.)
With GECC stock trading at $7.71 apiece, that translates to an annual yield of 13%.
Better yet, while most dividend-paying companies on the market today follow a quarterly distribution schedule, Great Elm Capital stock is a monthly dividend payer. So instead of waiting three months for a dividend check, GECC stock investors can expect a check of $0.083 per share to arrive in the mail every single month.
For income investors, few things look more appealing than a high-yield monthly dividend stock.
Great Elm Capital has a lucrative business to back its payout. The company’s portfolio consists of both debt and equity investments, but its main focus is senior secured lending.
As of September 30, 2019, first lien/secured debt comprised 86.4% of GECC’s portfolio by fair value. The weighted average yield on its debt portfolio was 11%.
The BDC has also done a decent job at covering its oversized distributions.
In the third quarter of 2019, Great Elm earned a net investment income of $0.26 per share, which was in excess of the three monthly dividends totaling $0.249 per share declared for the period. (Source: “Great Elm Capital Corp. Announces Third Quarter 2019 Financial Results,” Great Elm Capital Corp, November 14, 2019.)
Looking further back, you’ll see that the company’s net investment income has covered its regular distribution every quarter since its founding in 2016. (Source: “Investor Presentation – Quarter Ended September 30, 2019,” Great Elm Capital Corp, op. cit.)
Great Elm Capital Corp: Collecting More Than Just Monthly Dividends?
The best part is, regular monthly dividends aren’t the only thing Great Elm Capital stock investors have collected over the years. The company also pays special distributions from time to time.
Looking at GECC stock’s dividend history, we see that the company declared a $0.20-per-share special dividend in December 2017, a $0.24-per-share special dividend in December 2018, and a $0.05-per-share special dividend in December 2019. (Source: “Distribution Information,” Great Elm Capital Corp, op. cit.)
Put it all together and Great Elm Capital stock looks like a very interesting high-yield opportunity.