Critical Contrast: Fidus Investment (NASDAQ:FDUS) & Kayne Anderson BDC (NYSE:KBDC)

Fidus Investment (NASDAQ:FDUS) and Kayne Anderson BDC (NYSE:KBDC) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, risk, dividends and analyst recommendations.

Analyst Recommendations

This is a summary of current ratings and price targets for Fidus Investment and Kayne Anderson BDC, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fidus Investment	0	2	1	1	2.75
Kayne Anderson BDC	0	1	3	0	2.75

Fidus Investment presently has a consensus price target of $21.00, suggesting a potential upside of 11.23%. Kayne Anderson BDC has a consensus price target of $15.38, suggesting a potential upside of 3.86%. Given Fidus Investment’s higher probable upside, equities analysts plainly believe Fidus Investment is more favorable than Kayne Anderson BDC.

Dividends

Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 9.1%. Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 10.8%. Fidus Investment pays out 75.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Kayne Anderson BDC pays out 125.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional and Insider Ownership

28.1% of Fidus Investment shares are held by institutional investors. 0.9% of Fidus Investment shares are held by insiders. Comparatively, 2.9% of Kayne Anderson BDC shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Fidus Investment and Kayne Anderson BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Fidus Investment	49.51%	11.19%	5.97%
Kayne Anderson BDC	37.30%	10.47%	5.14%

Valuation & Earnings

This table compares Fidus Investment and Kayne Anderson BDC”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fidus Investment	$155.87 million	4.60	$82.40 million	$2.28	8.28
Kayne Anderson BDC	$235.82 million	4.17	$93.71 million	$1.28	11.57

Kayne Anderson BDC has higher revenue and earnings than Fidus Investment. Fidus Investment is trading at a lower price-to-earnings ratio than Kayne Anderson BDC, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Fidus Investment has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500. Comparatively, Kayne Anderson BDC has a beta of 0.28, meaning that its stock price is 72% less volatile than the S&P 500.

Summary

Fidus Investment beats Kayne Anderson BDC on 10 of the 16 factors compared between the two stocks.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.

About Kayne Anderson BDC

Kayne Anderson BDC Inc. is a business development company which invests primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Kayne Anderson BDC Inc. is based in CHICAGO.