Analyst Derek Hewett of Bank of America Securities reiterated a Hold rating on Palmer Square Capital BDC Inc. (PSBD – Research Report), with a price target of $16.50.
Derek Hewett has given his Hold rating due to a combination of factors impacting Palmer Square Capital BDC Inc. The company’s recent quarterly performance showed a core EPS of $0.45, which fell short of expectations set by both BofA and the Street, primarily due to yield compression affecting the top line. Although the GAAP EPS was anticipated, the quarter was somewhat disappointing with a decline in NAV per share and weaker core profitability, leading to a reduction in the core dividend.
Despite these challenges, the credit quality remains solid, and the company’s strategy of investing across both liquid and private markets is seen as capable of generating attractive risk-adjusted returns. However, the balance between risk and reward appears even, justifying the Hold rating. The core dividend was reduced by 14% to $0.36 per share, reflecting a more sustainable level in the current investment climate, although supplemental dividends will continue to offset this reduction. Overall, the valuation remains stable with a price objective of $16.50, and leverage is steady at 1.5x, indicating a relatively stable portfolio.