Reviewing Palmer Square Capital BDC (NYSE:PSBD) and Bain Capital Specialty Finance (NYSE:BCSF)

Bain Capital Specialty Finance (NYSE:BCSF) and Palmer Square Capital BDC (NYSE:PSBD) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, risk, analyst recommendations, earnings and dividends.

Analyst Recommendations

This is a breakdown of recent recommendations for Bain Capital Specialty Finance and Palmer Square Capital BDC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
Palmer Square Capital BDC	0	3	0	0	2.00

Bain Capital Specialty Finance presently has a consensus target price of $14.00, suggesting a potential upside of 5.33%. Palmer Square Capital BDC has a consensus target price of $11.00, suggesting a potential upside of 3.48%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Bain Capital Specialty Finance is more favorable than Palmer Square Capital BDC.

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.6%. Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.5%. Bain Capital Specialty Finance pays out 147.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Palmer Square Capital BDC pays out -138.5% of its earnings in the form of a dividend. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

6.5% of Palmer Square Capital BDC shares are owned by institutional investors. 0.6% of Bain Capital Specialty Finance shares are owned by insiders. Comparatively, 1.1% of Palmer Square Capital BDC shares are owned by 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.

Earnings & Valuation

This table compares Bain Capital Specialty Finance and Palmer Square Capital BDC”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$273.24 million	3.16	$98.76 million	$1.14	11.66
Palmer Square Capital BDC	$124.39 million	2.66	-$3.17 million	($1.04)	-10.22

Bain Capital Specialty Finance has higher revenue and earnings than Palmer Square Capital BDC. Palmer Square Capital BDC is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bain Capital Specialty Finance and Palmer Square Capital BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	27.00%	10.44%	4.35%
Palmer Square Capital BDC	-26.82%	11.01%	4.14%

Volatility & Risk

Bain Capital Specialty Finance has a beta of 0.59, meaning that its share price is 41% 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

Bain Capital Specialty Finance beats Palmer Square Capital BDC on 11 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

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.