Head-To-Head Review: Stellus Capital Investment (NYSE:SCM) & Kayne Anderson BDC (NYSE:KBDC)

Kayne Anderson BDC (NYSE:KBDC) and Stellus Capital Investment (NYSE:SCM) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for Kayne Anderson BDC and Stellus Capital Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kayne Anderson BDC	0	1	3	0	2.75
Stellus Capital Investment	0	3	0	0	2.00

Kayne Anderson BDC presently has a consensus target price of $15.00, indicating a potential upside of 10.01%. Stellus Capital Investment has a consensus target price of $9.00, indicating a potential upside of 1.94%. Given Kayne Anderson BDC’s stronger consensus rating and higher probable upside, equities analysts clearly believe Kayne Anderson BDC is more favorable than Stellus Capital Investment.

Dividends

Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 11.7%. Stellus Capital Investment pays an annual dividend of $1.36 per share and has a dividend yield of 15.4%. Kayne Anderson BDC pays out 120.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment pays out 144.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility & Risk

Kayne Anderson BDC has a beta of 0.23, indicating that its share price is 77% less volatile than the S&P 500. Comparatively, Stellus Capital Investment has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Institutional & Insider Ownership

13.2% of Stellus Capital Investment shares are held by institutional investors. 3.1% of Kayne Anderson BDC shares are held by company insiders. Comparatively, 4.0% of Stellus Capital Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Kayne Anderson BDC and Stellus Capital Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kayne Anderson BDC	39.74%	10.23%	5.15%
Stellus Capital Investment	26.48%	10.28%	3.74%

Earnings and Valuation

This table compares Kayne Anderson BDC and Stellus Capital Investment”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kayne Anderson BDC	$235.82 million	3.87	$93.71 million	$1.33	10.25
Stellus Capital Investment	$102.14 million	2.50	$27.05 million	$0.94	9.39

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

Summary

Kayne Anderson BDC beats Stellus Capital Investment on 11 of the 16 factors compared between the two stocks.

About Kayne Anderson BDC

Kayne Anderson BDC Inc. is a business development company which invests primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Kayne Anderson BDC Inc. is based in CHICAGO.

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.