Another Dividend Announcement is an Increase
May has been a good month for dividends. As a result of some minor changes in our investments, and dividend growth, our estimated annual dividends for the next twelve months will be about $160K. This does not include interest from a few CDs or income from other money market holdings like SPAXX and FDRXX.
The Specifics
Saratoga Investment (NYSE: SAR) declares $0.74/share quarterly dividend, 1.4% increase from prior dividend of $0.73. Forward yield 12.75% Payable June 27; for shareholders of record June 13; ex-div June 13.
I find this investment appealing on several fronts. First of all, the P/E (FWD) is 6.35. Why is it so low? Because the shares are not in high demand. This is an income investment. The Dividend Rate (FWD) is $2.92, so 100 shares earn $292 every year, if the dividend continues as I would hope. Finally, this is a high yield (FWD) investment: 12.58%. Again, for those who are afraid of risk, don’t buy shares.
Small Market Cap
This is not an investment for the faint-hearted or a person with a short-term need to raise cash by selling SAR shares. The SAR Market Cap is small at $318.09M and the trading volume is also very subdued. Saratoga Investment Corp. (NYSE: SAR) is a publicly traded business development company (BDC) that provides customized financing solutions for middle market companies located in the United States. Saratoga’s senior investment professionals have over 200 years of combined experience investing in more than $4 billion in middle market businesses.
Company Profile – Saratoga Investment Corp.
Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media, and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefers to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.
Easy Income Strategy Reminder
The goal of easy income is to have consistent and often increasing income that requires little or no effort. When I buy any position, whether it is a stock or an ETF, I want to see gradually increasing dividends. Sometimes good news comes in groups, but that is, admittedly, rare. It really depends on the makeup of your investment portfolio. The best thing about a long-term investment perspective is that it requires very little time, effort, or maintenance. I don’t have to day-trade, sell covered call options, or even think about the ups-and-downs of a volatile stock market.
Recommendation
If you have less than $200K, I suggest that you focus on dividend growth ETFs like VYM, DGRO, and SCHD. However, adding some BDC and REIT exposure is a good strategy, even if you have less than $100K in your retirement portfolio. You can then add shares as you deposit more funds to your accounts. However, be careful about adding REITs to taxable accounts. It is better to own REITs in traditional or ROTH IRA accounts.
Know Your Flocks & Herds 
thanks, I enjoy your articles. I have some SAR myself but also some O and AGR, NNN and STAG in a brokerage account. Maybe I should move those funds into something like VYM?
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As much as I like VYM, SCHD, and DGRO, I still want some more powerful income-producing investments in BDCs and REITs. I have yet to find an ETF that does justice to either of those categories. Therefore, like you, I own shares of O, NNN, and STAG. The other nice thing about some REITs is that they pay monthly.
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