In the past 30 days, 10 analysts have increased their EPS estimates for this BDC. The shares have a current dividend yield of 8.42%, paid quarterly.
Owl Rock Capital Corporation (ORCC)
From The Dividend Hunter
Owl Rock Capital Corp. launched with a July 2019 IPO. Owl Rock was one of the largest publicly traded Business Development Companies (BDCs) right out the gate. Now that ORCC has been in the public domain for two years, it becomes easier to compare with its peers.
By law, BDCs provide financing solutions to small and medium size corporations. A BDC may provide loans or make equity investments in its client companies. Most BDCs focus on lending, building, and managing a portfolio of loans. As of the 2021 second quarter, the company had a portfolio value of $11.9 billion. The portfolio investments were 76% first lien and 17% second lien loans. They total 93% of the portfolio in the two safest categories of commercial loans. As of the second quarter, only 0.5% of the portfolio was on non-accrual status.
The portfolio earns an asset yield of 8.1%. Owl Rock has a BBB investment grade credit rating from four different rating agencies and pays an average of 3.0% on outstanding debt. Debt to equity stands at 1.00 times. This level of leverage means that the portfolio currently is funded 50% by the equity, which are the shares of stock, and 50% by borrowed money. By rule, a BDC can carry leverage of up to 2.0 times equity. That balance is visible by checking the current market cap of $5.75 billion, roughly half the investment portfolio size.
At the end of the second quarter, the Owl Rock book or net asset value (NAV) was $14.90 per share. Net investment income came in at $0.30 per share, with a total net income of $0.38 per share.
The current $0.31 quarterly dividend should be secure. I expect Owl Rock will be able to steadily grow its net investment income and book value steadily.
Owl Rock is a BDC whose peers trade at a premium to NAV. The stock currently trades at a slight discount. Ares Capital (ARCC) is a comparable, large BDC that trades for 1.1 times NAV. Owl Rock, at a similar valuation, would sell for $16.40 per share.
I see the Owl Rock dividend as secure, and the yield is one of the highest from the Dividend Hunter Stable Dividend Investments category. I would like to see the company produce steady net investment income per share growth and eventually follow the Hercules Capital (HTGC) practice of paying extra dividends out of the excess income.
Tim Plaehn, The Dividend Hunter, yn345.isrefer.com/go/cabmdpc/cab/, September 2021