Head to Head Comparison: Blackrock Tcp Capital (NASDAQ:TCPC) versus Stellus Capital Investment (NYSE:SCM)

Stellus Capital Investment (NYSE:SCM) and Blackrock Tcp Capital (NASDAQ:TCPC) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, valuation, risk, analyst recommendations and earnings.

Insider and Institutional Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. 4.0% of Stellus Capital Investment shares are owned by company insiders. Comparatively, 0.2% of Blackrock Tcp Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility and Risk

Stellus Capital Investment has a beta of 0.66, meaning that its share price is 34% less volatile than the S&P 500. Comparatively, Blackrock Tcp Capital has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500.

Dividends

Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 12.7%. Blackrock Tcp Capital pays an annual dividend of $1.00 per share and has a dividend yield of 16.4%. Stellus Capital Investment pays out 146.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Blackrock Tcp Capital pays out -769.2% of its earnings in the form of a dividend. Blackrock Tcp Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Stellus Capital Investment and Blackrock Tcp Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	0	3	0	0	2.00
Blackrock Tcp Capital	2	1	0	0	1.33

Stellus Capital Investment presently has a consensus target price of $13.00, indicating a potential upside of 3.17%. Blackrock Tcp Capital has a consensus target price of $6.50, indicating a potential upside of 6.63%. Given Blackrock Tcp Capital’s higher possible upside, analysts clearly believe Blackrock Tcp Capital is more favorable than Stellus Capital Investment.

Profitability

This table compares Stellus Capital Investment and Blackrock Tcp Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	29.77%	10.72%	3.95%
Blackrock Tcp Capital	-4.20%	15.27%	6.15%

Earnings & Valuation

This table compares Stellus Capital Investment and Blackrock Tcp Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$104.74 million	3.48	$45.85 million	$1.09	11.56
Blackrock Tcp Capital	$259.44 million	1.99	-$63.14 million	($0.13)	-46.89

Stellus Capital Investment has higher earnings, but lower revenue than Blackrock Tcp Capital. Blackrock Tcp Capital is trading at a lower price-to-earnings ratio than Stellus Capital Investment, indicating that it is currently the more affordable of the two stocks.

Summary

Stellus Capital Investment beats Blackrock Tcp Capital on 8 of the 15 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About Blackrock Tcp Capital

BlackRock TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, small businesses, debt securities, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It typically invests in communication services, public relations services, television, wireless telecommunication services, apparel, textile mills, restaurants, retailing, energy, oil and gas extraction, Patent owners and Lessors, Federal and Federally- Sponsored Credit agencies, insurance, hospital and healthcare centers, Biotechnology, engineering services, heavy electrical equipment, tax accounting, scientific and related consulting services, charter freight air transportation, Information technology consulting, application hosting services, software diagram and design, computer aided design, communication equipment, electronics manufacturing equipment, computer components, chemicals. It seeks to invest in the United States. The fund typically invests between $10 million and $35 million in companies with enterprise values between $100 million and $1500 million including complex situations. It prefers to make equity investments in companies for an ownership stake.