This 12.7% Yield Looks Interesting

As we have seen plenty of times, a company that can’t cover its payout will have to cut its dividend at some point. And when that happens, the company’s stock price could take a hit as well due to the bad news. As a risk-averse investor, you certainly don’t want to buy a high-yield stock before it cuts its dividend. But what about after the dividend cut? Well, that could lead to some interesting discussions.

THL Credit, Inc. (NASDAQ:TCRD) is an ultra-high yielder that cut its payout earlier this year. The Boston, Massachusetts-based business development company (BDC) never really made headlines in financial media, but has always offered a generous dividend policy since it went public in 2010. When THL Credit reported 2018 fourth-quarter earnings on March 6, 2019, it also announced a quarterly dividend rate of $0.21 per share. Compared to the company’s prior quarterly cash dividend of $0.27 per share, the new dividend rate represented a 22.2% reduction. Seeing the improvement in dividend coverage, management intends to maintain the company’s oversized payout. According to Chief Executive Officer Christopher Flynn, the company, “set the dividend at a level with a new management team where we feel like as we sit here today, we can still cover it at that 105% to 110%.”

Source: Income Investors

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