Contrasting Stellus Capital Investment (NYSE:SCM) and Oxford Square Capital (NASDAQ:OXSQ)

Stellus Capital Investment (NYSE:SCM) and Oxford Square Capital (NASDAQ:OXSQ) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, institutional ownership, risk, earnings, analyst recommendations, dividends and profitability.

Dividends

Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 12.4%. Oxford Square Capital pays an annual dividend of $0.42 per share and has a dividend yield of 25.5%. Stellus Capital Investment pays out 110.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oxford Square Capital pays out -2,100.0% of its earnings in the form of a dividend. Oxford Square Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Stellus Capital Investment and Oxford Square Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$44.62 million	8.19	$45.85 million	$1.45	8.87
Oxford Square Capital	$2.95 million	43.65	$5.88 million	($0.02)	-82.50

Stellus Capital Investment has higher revenue and earnings than Oxford Square Capital. Oxford Square Capital is trading at a lower price-to-earnings ratio than Stellus Capital Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Stellus Capital Investment and Oxford Square Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	38.24%	11.06%	4.12%
Oxford Square Capital	-3.35%	15.19%	8.11%

Insider & Institutional Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. Comparatively, 6.4% of Oxford Square Capital shares are owned by institutional investors. 4.0% of Stellus Capital Investment shares are owned by insiders. Comparatively, 8.6% of Oxford Square Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Stellus Capital Investment has a beta of 0.9, meaning that its share price is 10% less volatile than the S&P 500. Comparatively, Oxford Square Capital has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Stellus Capital Investment and Oxford Square Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	0	1	1	0	2.50
Oxford Square Capital	1	0	0	0	1.00

Stellus Capital Investment currently has a consensus price target of $13.00, indicating a potential upside of 1.05%. Given Stellus Capital Investment’s stronger consensus rating and higher probable upside, analysts plainly believe Stellus Capital Investment is more favorable than Oxford Square Capital.

Summary

Stellus Capital Investment beats Oxford Square Capital on 10 of the 16 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About Oxford Square Capital

Oxford Square Capital Corp. is a business development company, operates as a closed-end, non-diversified management investment company. It is a private equity and mezzanine firm. The firm invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock and syndicated bank loans. The firm primarily invests in debt and/or equity securities of technology-related companies that operate in the computer software, Internet, information technology infrastructure and services, media, telecommunications and telecommunications equipment, semiconductors, hardware, technology-enabled services, semiconductor capital equipment, medical device technology, diversified technology, and networking systems sectors. It concentrates its investments in companies having annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. The firm invests between $5 million and $30 million per transaction. It seeks to exit its investments within 7 years. It serves as the investment adviser to TICC. Oxford Square Capital Corp., formerly known as TICC Capital Corp., was founded in 2003 and is headquartered in Greenwich, Connecticut.