Oaktree Specialty Lending Corporation Aktie News

Agency mortgage REITs duel to the dividend cut. There are 7 facing off. The top 3 are much better than the other 4. Valuations are important and awful. Deal with it.

It has become a consensus in the market that many BDCs, sooner or later, will have to deliver unpleasant dividend cuts. For example, the sector average dividend coverage level is 100%, which does not look promising amid a lower base rate environment. Yet, as in the case with almost any average, it consists of several positive and negative outliers.

Oaktree Specialty Lending faces severe portfolio performance issues, with a 6.5% cost-based non-accrual ratio and inconsistent dividend coverage. OCSL's high non-accruals, despite an 83% first-lien allocation, raise significant concerns about loan quality and dividend sustainability. With 91% floating-rate exposure and falling net investment income, OCSL is at high risk of a dividend cut if int...

There is certainly no shortage of arguments why not to invest in BDCs. The sector median BDC trades at a 21% discount to NAV. For me, this provides an opportunity to scoop up unfairly punished gems.

BDCs are facing pressures from multiple fronts. Yet, they do not have much ammo left to fight back via portfolio growth. This is not good for shareholder and BDC managers, who earn fees based on asset size and earnings results.

Oaktree Specialty Lending has historically generated mediocre annualized returns for buy-and-hold investors. Rising defaults and write-offs raise concerns over further dividend cuts. Structural shortcomings prevent the company from building a loan-loss reserve, translating to practically an inevitable decline in NAV.

Blackstone Secured Lending and Oaktree Specialty Lending have pulled back sharply. I compare them side by side. I share why I prefer BXSL over OCSL, and what it would take for me to buy them.

Oaktree Specialty Lending trades at a compelling discount, which, in light of the relatively positive earnings report, might create an interesting buying opportunity. Yet, while the discount looks attractive, compared to its closest peers, OCSL is actually similarly priced. Also, the dividend coverage remains tight, even after the recent cut.