PennantPark Investment Corporation – PNNT
The more income you can make that isn’t taxed in retirement, the more cash you then have for charitable giving or other normal living expenses. Therefore, I look for opportunities to move assets from my traditional IRA to my ROTH. Because BDCs usually have a larger dividend yield, more cash is flowing into the IRA for future needs. On July 21, 2023, I decided to move my PNNT shares. This will give me an additional $800 per year in dividend income that will be tax free forever (unless the government changes the rules!)
The Transfer Pieces
The transfer begins as a way to move cash from the IRA to another account. However, as you progress through the options, it is possible, without a representative’s help, to move a portion or all of the shares of a position. I had 1,000 shares of PNNT to move, and I decided to move all of them. One “risk” associated with this approach is that you don’t really know what your total dollar amount is until the market closes. However, because I waited until just before the market closed, I was reasonably certain that I was not going to be surprised. The market price was $6.37 but the stock closed at $6.35, so my total taxable “income” from the transfer is $6,350.
Insider Buys
One of the resources I use is called Wallmine. I like Wallmine because it is a quick way to see if insiders are buying or selling. When the chairman and CEO is buying thousands of dollars of his company’s shares, it is an indicator that they think their company shares are reasonably priced. As you can see, Arthur Penn, Samuel Katz, Richard Allorto, and Jose Briones have all purchased shares since February. I’d like to think they know something about the potential success and growth of the company.
Stock Rover Dividend Graph
The astute and cautious investor will immediately notice that PNNT has not been on a dividend growth trajectory. However, I believe the trend will continue upwards given the increasing interest rates. Clearly 2020-2021 probably sent many dividend investors running for the exit.
Stock Rover Details
Another advantage of StockRover is that it is easy to see some basic profile and description information. If you are afraid of small-cap and micro-cap investments, then PNNT is not for you. It has a market cap of $416M. That is very small.
Seeking Alpha Details
No review is complete without looking at the markers on Seeking Alpha. I numbered seven things I consider. Of most importance are 5, 6, and 7. Five tells me the QUANT rating, six breaks out valuation, growth, profitability, momentum, and earnings revisions grades. Looks like PNNT is a good student. Number 7 is also interesting. PNNT is ranked 2 out of 94 in the BDC industry.
For those of you who like a lot of detail, the following section covers more details about PNNT that are not included in the Stock Rover business description. I copied that section from Seeking Alpha.
Company Profile for PennantPark Investment Corporation
PNNT a business development company is a private equity fund specializes in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The fund typically invests in buildings and real estate, hotels, gaming and leisure, technology, telecommunications, transportation, information technology services, electronics, healthcare & pharmaceuticals, education and childcare, financial services, printing and publishing, consumer products, business services, energy & Related Services and utilities, distribution, oil and gas, media, environmental services, aerospace and defense, building materials, capital equipment, chemicals, plastics, & rubber, food & beverage, wholesale, manufacturing and basic industries and retail. It invests in equity securities and debt transactions through preferred stock, common stock, warrants, options, senior secured debt, subordinated debt, subordinated loans, first lien debt, mezzanine loans, and distressed debt securities and private equity co-investments. It seeks to invest in companies based in the United States. The fund seeks to invest between $10 million and $100 million cross the capital structure (senior secured loans, subordinated debt, and other investments) in its portfolio companies with EBITDA between $10 to $50 million. Its mezzanine loans, senior secured loans, and other investments in its portfolio companies are between $15 million and $50 million. The fund may also make non-control equity and debt investments.
Full Disclosure
BDCs are a big part of my income strategy. They are not for everyone, but I think wise investors include BDCs like MAIN, ARCC, and CSWC in their portfolio.
Know Your Flocks & Herds 