Hercules Capital Poised for Growth Despite Economic Uncertainty with Strong Dividend Cover and Floating Rate Debt Investments
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Hercules Capital (HTGC) is a business development company focused on financing technology and life sciences companies. It has a strong track record of dividend coverage and net investment income growth.
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HTGC achieved record funding volumes in 2022 while maintaining conservative leverage compared to peers. This provides capacity to fund further growth.
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Higher interest rates benefit HTGC since most of its debt investments have floating rates. This led to 21% return on equity in 2022.
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While economic volatility could impact borrowers, 89% of HTGC's investments are senior secured debt, providing protection in case of adversity.
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At current valuations, HTGC offers a high 8.6% dividend yield with reasonable payout coverage. The author continues to rate it a "Buy" for income investors.