A recent Barclays note suggested that Prospect Capital (NASDAQ:PSEC) may have trouble repeating its Q2 success. Analyst Mark DeVries noted that PSEC'ssale of Harbortouch last quarter generated $0.04 per share in one-time items. Without this boost, NII would have been just $0.22 per share, versus $0.26 per share reported. In addition, without this extra income, PSEC would not have covered its quarterly dividend, which is currently at $0.25 per share (paid monthly at $0.0833). However, I feel folks are getting ahead of themselves regarding this issue.
PSEC data by YCharts
PSEC has plenty of dry powder to invest
For starters, PSEC got $322 million net from divesting Harbortouch. This cash, as well as a slowdown in originations during the first half of the year, has resulted in PSEC's debt to equity ratio falling to just 69.5% as of the end of last quarter, down a sharp 8.1% from 77.6% a year ago. While less leverage lowers risk, it also lowers returns.
