Saratoga Investment Corp (SAR) CFO: Healthy Dividend, Lots Of Dry Powder

However, one shortcoming of the Price-to-NII valuation multiple is that it doesn’t include net realized gains and losses. Perhaps a more comprehensive metric is return on equity (ROE), and Saratoga stands out in this regard relative to its peers as shown in the following chart.

And for reference, the following chart shows Saratoga’s historical ROE (incidentally, this chart also shows the improvement since Saratoga took over the BDC in 2010).

Another way to gauge the value and safety of a BDC and its dividend is the dividend coverage ratio. And as shown in our earlier chart, Saratoga’s NII easily covers its dividend whereas many of its peers struggle.

Competitive Advantages:

SBIC License:

In addition to a reasonable valuation and a relatively safe dividend, Saratoga Investment Corp (NYSE:SAR) has several important competitive advantages, such as its SBIC-licensed subsidiary. For reference, according to the Small Business Administration, the SBIC program is…

A multi-billion dollar program founded in 1958, the SBIC Program is one of many financial assistance programs available through the U.S. Small Business Administration. The structure of the program is unique in that SBICs are privately owned and managed investment funds, licensed and regulated by SBA, that use their own capital plus funds borrowed with an SBA guarantee to make equity and debt investments in qualifying small businesses. The U.S. Small Business Administration does not invest directly into small business through the SBIC Program, but provides funding to qualified investment management firms with expertise in certain sectors or industries.