As the economy continues to recover from the worst economic collapse since the Great Depression, many investors are growing restless with the wild swings of the stock market. Meanwhile, savvy companies are pulling out all the stops to either stay afloat or plan their next phase of growth.
That often includes finding a trusted financial solutions provider for many of their strategic plans — leveraged buyouts, recapitalizations, growth financing, employee stock option plans and acquisition financing, among others.
And there is one company that stands out as a high quality player.
You won't hear about it in the financial press much — but that's because it works behind the scenes, filling many of the needs of small and mid-size public companies that can't be filled by the big banks on Wall Street.
In fact, it's part of an exclusive club — only 27 of these companies are traded on the market. Yet the Wall Street elites who have used the same tactics this company uses have made a fortune this way for years. But now, regular investors like you and me can buy into this group of stocks. And best of all, they're income machines, paying dividend yields of 8.7% on average.
I'm talking about business development companies (BDC). The one I'm specifically referring to, Triangle Capital Corp. (Nasdaq: TCAP), pays a very healthy 7.6% dividend.
The company specializes primarily in private equity and venture capital investments, offering a wide range of financing solutions, including subordinated debt with warrants, first- and second-lien loans, one-stop and unitranche structures, and equity co-investments. I know that all sounds like a mouthful, but suffice it to say, this company operates in a very profitable niche, financing the needs of lower middle-market companies.
The companies Triangle usually works with have a history of generating revenue and positive cash flows, an established market position and a disciplined management team. Furthermore, its target portfolio companies typically have revenue of $10 million to $200 million, and EBITDA of $3 million and up.
The company's management team has a unique mix of finance and operating expertise in a wide range of industries. Its portfolio contains investments in many business sectors including manufacturing, distribution, transportation, energy, communications, health services and restaurants among others. Most important, it excels is in its ability to evaluate transactions quickly, follow through on commitments and close deals on time.
Triangle's regional focus is primarily in the Southeastern region of the United States. Within its portfolio of companies, you will find:
- Ambient Air Corp., a leading design/build contractor for HVAC (heating, ventilation, and air conditioning) systems in the housing industry, with an emphasis on the Southeast.
- Ann's, based in Columbia, Maryland, it's the largest manufacturer and marketer of trail mixes in North America.
- AssetPoint, a pioneer in delivering integrated enterprise asset management and computerized maintenance management software and services that improve profitability and productivity for the process and manufacturing industries.
- FSI Frozen Specialties, a leading manufacturer of private-label frozen pizzas, sold primarily through grocery stores.
- Home Physicians, a provider of primary-care physician services and podiatry services in homes and assisted-living facilities.
- McKenzie, the largest designer and manufacturer of taxidermy forms and supplies used to mount hunting and fishing trophies in the United States.
- Technology Crops International, a company working with customers to develop and maintain supply chains for high-value, plant-derived oils and oil seeds used as manufacturing ingredients in the food, chemical, cosmetics and pharmaceutical industries.
As you can see, the company has a diverse group of customers in much needed industries. Because it's a trusted partner, many small- and mid-sized businesses depend on Triangle Capital's financial strength, along with its seasoned experience and operational expertise to create customized solutions to support growth, buyouts, recapitalizations or other financing needs.
Take a look at Triangle Capital since October of 2011:
Looking at Triangles Capital's latest quarterly results, it continues to shine. Some of the highlights from this year's second-quarter include:
- Total investment portfolio: $598.4 million
- Weighted average yield on debt investments: 15.0%
- Total investment income: $22.0 million
- Net investment income: $14.1 million
- Dividends paid per share: $0.50
- Net realized gains: $3.6 million
- Net increase in net assets resulting from operations: $15.6 million
It's clear the second-quarter of 2012 yielded very positive results for Triangle. Its portfolio produced realized gains during the quarter, while its efficiency ratio continues to be one of the best in the BDC industry.
Triangle remains liquid and has sufficient reserves. As of June 30, 2012, the company had cash and cash equivalents totaling $93.7 million. Its debt is relatively low as well at roughly $250 million. Because it's in the lending business, the company borrows money at about 4-5% and lends it out at a higher rate, keeping the difference.
In June, Triangle announced a 13.6% year-over-year increase to its quarterly dividend. Additionally, its investment pace during the second quarter remained steady with seven new investments. Taking all of these factors into account, I think Triangle is very well positioned for the rest of 2012 and 2013 as the economic recovery continues.
Risks to Consider: Though Triangle's portfolio is well diversified, it is still highly sensitive to the overall economy, particularly the Southeast United States where most of its customers are located. Because Triangle is dependent on new investments and developments, a further slowdown in the economy could impair financial results.
Action to Take –> Buy Triangle Capital for up to $27 a share. With a well-diversified, solid portfolio of customers, this stock could easily hit $35 within the next 12 months. Best yet, it pays a nearly 8% dividend, so you will get paid a healthy dividend while waiting for appreciation.
– Jay Peroni
P.S. — As I said earlier, many of Wall Street's most elite investors have made money for years in the same way companies like Triangle do. But until recently, this "underground" stock market has been off limits to regular investors like you and me. But thanks to StreetAuthority's latest research, we've found a way you invest in this underground market. To learn more, click here now.
This article originally appeared on StreetAuthority
Author: Jay Peroni
How to Get an 8% Yield from one of the Most Exclusive Stocks on Wall Street