Financial Analysis: Kayne Anderson BDC (NYSE:KBDC) versus Palmer Square Capital BDC (NYSE:PSBD)

Kayne Anderson BDC (NYSE:KBDC) and Palmer Square Capital BDC (NYSE:PSBD) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, risk, earnings, dividends, valuation, analyst recommendations and institutional ownership.

Valuation & Earnings

This table compares Kayne Anderson BDC and Palmer Square Capital BDC”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kayne Anderson BDC	$98.46 million	9.81	$93.71 million	$1.28	11.38
Palmer Square Capital BDC	$124.39 million	2.72	-$3.17 million	($1.04)	-10.45

Kayne Anderson BDC has higher earnings, but lower revenue than Palmer Square Capital BDC. Palmer Square Capital BDC 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.

Dividends

Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 11.0%. Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.2%. 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. Palmer Square Capital BDC pays out -138.5% of its earnings in the form of a dividend. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

6.5% of Palmer Square Capital BDC shares are held by institutional investors. 2.9% of Kayne Anderson BDC shares are held by insiders. Comparatively, 1.1% of Palmer Square Capital BDC shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Kayne Anderson BDC and Palmer Square Capital BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kayne Anderson BDC	37.30%	10.47%	5.14%
Palmer Square Capital BDC	-26.82%	11.01%	4.14%

Analyst Ratings

This is a summary of recent recommendations and price targets for Kayne Anderson BDC and Palmer Square Capital BDC, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kayne Anderson BDC	0	1	3	0	2.75
Palmer Square Capital BDC	0	3	0	0	2.00

Kayne Anderson BDC presently has a consensus target price of $15.38, suggesting a potential upside of 5.60%. Palmer Square Capital BDC has a consensus target price of $11.00, suggesting a potential upside of 1.20%. Given Kayne Anderson BDC’s stronger consensus rating and higher possible upside, research analysts clearly believe Kayne Anderson BDC is more favorable than Palmer Square Capital BDC.

Risk & Volatility

Kayne Anderson BDC has a beta of 0.28, meaning that its share price is 72% less volatile than the S&P 500. Comparatively, Palmer Square Capital BDC has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500.

Summary

Kayne Anderson BDC beats Palmer Square Capital BDC on 10 of the 16 factors compared between the two stocks.

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.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.