Contrasting Hennessy Advisors (NASDAQ:HNNA) & Palmer Square Capital BDC (NYSE:PSBD)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Hennessy Advisors	24.77%	8.31%	5.48%
Palmer Square Capital BDC	-18.27%	11.33%	4.13%

Volatility & Risk

Hennessy Advisors has a beta of 0.48, meaning that its stock price is 52% less volatile than the S&P 500. Comparatively, Palmer Square Capital BDC has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.

Institutional & Insider Ownership

10.3% of Hennessy Advisors shares are owned by institutional investors. Comparatively, 6.5% of Palmer Square Capital BDC shares are owned by institutional investors. 36.0% of Hennessy Advisors shares are owned by company insiders. Comparatively, 1.1% of Palmer Square Capital BDC shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Hennessy Advisors and Palmer Square Capital BDC”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hennessy Advisors	$35.54 million	2.29	$9.96 million	$1.04	9.90
Palmer Square Capital BDC	$124.39 million	2.38	-$3.17 million	($0.63)	-15.61

Hennessy Advisors 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 Hennessy Advisors, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Hennessy Advisors and Palmer Square Capital BDC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hennessy Advisors	0	1	0	0	2.00
Palmer Square Capital BDC	0	5	0	0	2.00

Palmer Square Capital BDC has a consensus target price of $10.25, indicating a potential upside of 4.23%. Given Palmer Square Capital BDC’s higher probable upside, analysts clearly believe Palmer Square Capital BDC is more favorable than Hennessy Advisors.

Dividends

Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 5.8%. Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 14.6%. Hennessy Advisors pays out 57.7% of its earnings in the form of a dividend. Palmer Square Capital BDC pays out -228.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

About Hennessy Advisors

Hennessy Advisors, Inc. is an investment management company that provides portfolio management, investment advisory and related services. Through its Hennessy Funds business, the company offers a range of investment products designed for individual investors, financial professionals and institutions. The company’s offerings have included actively managed mutual funds and exchange-traded funds covering equities, fixed income and specialized investment strategies. Its portfolios may focus on areas such as large- and small-capitalization companies, financial services, technology, utilities, international markets and other targeted segments.

About Palmer Square Capital BDC

Palmer Square Capital BDC, Inc. is a business development company that seeks to generate income and, to a lesser extent, capital appreciation by investing in corporate credit. Its portfolio is focused primarily on senior secured loans and other debt investments, including loans to U.S. middle-market companies. The company is externally managed by Palmer Square Capital Management, an alternative credit investment manager. Its investment approach draws on the manager’s experience in corporate credit and related markets, with an emphasis on evaluating borrowers and structuring investments to manage credit risk.