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OFS Capital: Worsening Non-Accrual Rate And Poor Dividend Coverage (Rating Downgrade)


Published on 2024-12-01 07:31:07 - Bill Williamson, WOPRAI
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  • OFS Capital continues to underperform peers because of its limited portfolio strategy and rising non-accruals. Read why I downgrade OFS from hold to sell.

The article from SeekingAlpha discusses the financial health and investment outlook for OFS Capital Corporation (OFS). It highlights concerns over OFS's increasing non-accrual rate, which has risen to 10.5% of its portfolio, indicating a higher risk of loan defaults. This rate is significantly above the industry average, suggesting potential issues with the quality of its loan portfolio. Additionally, the article points out that OFS has been struggling with poor dividend coverage, with its net investment income failing to cover its dividend payouts, which raises questions about the sustainability of its dividend. The analysis suggests that while OFS offers a high yield, the combination of a worsening non-accrual rate and inadequate dividend coverage makes it a less attractive investment compared to other Business Development Companies (BDCs). The author advises caution, recommending that investors look for BDCs with better portfolio quality and more secure dividend coverage.

Read the Full Seeking Alpha Article at:
[ https://seekingalpha.com/article/4741363-ofs-capital-stock-worsening-non-accrual-rate-poor-dividend-coverage ]