Fifth Street Finance Corp. (NASDAQ:FSC) is widely diversified across various sectors such as health care, technology, defense and energy, among others. It pays a monthly dividend of about 10 cents per share, which works out to about a 12% yield. As of late March, 74% of Fifth Street Finance Corp. (NASDAQ:FSC)’s debt investments are in floating-rate securities. As I explained, this stands to benefit the company should interest rates continue to increase.
What closed the deal for me on Fifth Street Finance Corp. (NASDAQ:FSC) is the recent buying by insiders and institutional investors. On June 19, Fifth Street Finance Corp. (NASDAQ:FSC) CEO Leonard Tannenbaum added 20,000 shares to his portfolio. In addition, a variety of other company officers have recently increased their holdings — and there’s no stronger endorsement than insider buying. In addition, hedge fund manager David Einhorn of Greenlight Capital recently purchased almost 2 million shares, and even analysts at JPMorgan Chase & Co. (NYSE:JPM) say the dividend is “secure.”
Technically, I like this stock as a momentum play. Buying now after the breakout makes technical sense.
Risks to Consider: Fifth Street Finance Corp. (NASDAQ:FSC) does its best to mitigate risk through diversification and investing alongside top-tier private equity companies, but losses are always a possibility. In addition, be aware of the risks of overleveraging and being locked into illiquid investments. Always use stops and position size properly when investing.
Action to Take –> Adding Fifth Street Finance Corp. (NASDAQ:FSC) to your portfolio of high-dividend stocks is an ideal way to diversify and add another revenue source.
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This article was originally written by David Goodboy and posted on StreetAuthority.