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J.P. Morgan on Monday lowered its rating recommendation on business development companies SLR Investment Corp. (NASDAQ:SLRC) and Carlyle Secured Lending Inc. (NASDAQ:CGBD) to Underweight from Neutral on the basis of total return expectations relative to peers.
The downgrades also reflect what analyst Melissa Wedel believes will be a shift in investor focus through 2025.
On (CGBD), which saw its stock edge down 1.4% in Monday morning trading, Wedel pointed out that the stock is trading at a 7% premium to net asset value, representing a ~0.1x premium to peers.
She doesn't "have particular concerns with this portfolio or company: we see stable dividend coverage above 100% through our forecast period and good credit / NAV trends," according to a note written to clients.
(SLRC), meanwhile, may see "some potential pressure on dividend coverage" through net investment income starting next year. "We note that this could be a non-issue, should rate cuts evolve more slowly than expected or if SLRC is able to boost earnings power another way."
Still, she thinks the narrow dividend cushion next year may limit upside to the price-to-NAV multiple and relative total return vs. peers. (SLRC) slipped 0.7% at the time of writing.
Seeking Alpha's Peer tab compares numerous metrics of (CGBD) and (SLRC).
