Morgan Stanley Direct Lending Fund (NYSE:MSDL) vs. Palmer Square Capital BDC (NYSE:PSBD) Critical Contrast

Morgan Stanley Direct Lending Fund (NYSE:MSDL) and Palmer Square Capital BDC (NYSE:PSBD) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, valuation, dividends, analyst recommendations, earnings, profitability and institutional ownership.

Earnings & Valuation

This table compares Morgan Stanley Direct Lending Fund and Palmer Square Capital BDC”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Morgan Stanley Direct Lending Fund	$397.29 million	3.22	$122.09 million	$1.40	10.73
Palmer Square Capital BDC	$124.39 million	2.66	-$3.17 million	($0.11)	-96.51

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Palmer Square Capital BDC. Palmer Square Capital BDC is trading at a lower price-to-earnings ratio than Morgan Stanley Direct Lending Fund, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

6.5% of Palmer Square Capital BDC shares are held by institutional investors. 0.2% of Morgan Stanley Direct Lending Fund shares are held by company insiders. Comparatively, 1.1% of Palmer Square Capital BDC shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Morgan Stanley Direct Lending Fund has a beta of 0.35, indicating that its stock price is 65% less volatile than the S&P 500. Comparatively, Palmer Square Capital BDC has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500.

Dividends

Morgan Stanley Direct Lending Fund pays an annual dividend of $1.80 per share and has a dividend yield of 12.0%. Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.6%. Morgan Stanley Direct Lending Fund pays out 128.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Palmer Square Capital BDC pays out -1,309.1% of its earnings in the form of a dividend. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current recommendations for Morgan Stanley Direct Lending Fund and Palmer Square Capital BDC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14
Palmer Square Capital BDC	0	4	0	0	2.00

Morgan Stanley Direct Lending Fund presently has a consensus target price of $15.54, suggesting a potential upside of 3.51%. Palmer Square Capital BDC has a consensus target price of $11.75, suggesting a potential upside of 10.68%. Given Palmer Square Capital BDC’s higher possible upside, analysts clearly believe Palmer Square Capital BDC is more favorable than Morgan Stanley Direct Lending Fund.

Profitability

This table compares Morgan Stanley Direct Lending Fund and Palmer Square Capital BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Morgan Stanley Direct Lending Fund	30.73%	9.88%	4.49%
Palmer Square Capital BDC	-2.55%	10.82%	4.13%

Summary

Morgan Stanley Direct Lending Fund beats Palmer Square Capital BDC on 9 of the 16 factors compared between the two stocks.

About Morgan Stanley Direct Lending Fund

Morgan Stanley Direct Lending Fund is a business development company. It is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. Morgan Stanley Direct Lending Fund is based in NEW YORK.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.