Hercules Capital: Trades At Premium To NAV, But Distribution Coverage Is Strong

Summary

• I maintain a hold rating on Hercules Capital due to its high premium to NAV, awaiting a price drop before accumulating shares.
• HTGC's portfolio emphasizes senior secured first lien debt, providing high repayment priority and protection against borrower underperformance.
• Despite a slight increase in non-accrual rates, HTGC's distribution remains well-covered by earnings, ensuring no immediate threat to dividend reduction.
• Future interest rate cuts may reduce net investment income short term but could catalyze long-term growth by creating a favorable borrowing environment.