Prospect Enhanced Yield Fund Reports 10.6% Annualized Total Return
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 09 2026
0mins
Should l Buy PSEC?
Prospect Enhanced Yield Fund has announced recent performance results. For the three month period ended January 31, 2026, since fully deploying the Fund's anchor capital, the Fund has delivered an annualized total gross return of 10.6% based on net asset value, reflecting strong performance on an absolute basis and relative to a range of comparable exchange-traded funds and relevant market indices over the same period. During the same period, the Fund produced 147bps and 434bps higher annualized returns than two leading ETFs with comparable targeted asset classes and investment objectives. During the same period, the Fund produced 406bps higher net annualized returns than the benchmark ICE BofA BB US High Yield Index. During the same period, the Fund produced 782bps higher net annualized returns than the benchmark Morningstar LSTA US Leveraged Loan Index. The Fund also recently announced cash dividends to shareholders for January, February, and March 2026, resulting in an annualized cash dividend yield of 9.0% based on January 31, 2026 net asset value of $25.25 per share.
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Analyst Views on PSEC
About PSEC
Prospect Capital Corporation is a business development company that focuses on lending to and investing in private businesses. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. It invests primarily in senior and subordinated secured debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. It invests primarily in first and second lien secured loans and unsecured debt, which in some cases includes an equity component. It invests in debt and equity positions of structured credit, which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches. It may also acquire controlling interests in companies in conjunction with making secured debt investments in such companies. Its investment adviser is Prospect Capital Management L.P.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- OBDC II Fund Dynamics: The OBDC II fund offloaded $600 million in loans, representing 34% of its $1.7 billion portfolio, which will end regular quarterly liquidity payments to investors, shifting to a more restrictive periodic payout model.
- Liquidity Challenges: This transition highlights the increasing liquidity and transparency issues faced by Blue Owl, restricting investors' ability to withdraw funds amid ongoing expansion into the retail wealth space by private asset managers.
- Shareholder Return Plan: Blue Owl intends to use the proceeds from this asset sale to pay down debt and return up to $2.35 per share to OBDC II shareholders, approximately 30% of the fund's net asset value, aiming to create value for shareholders while maintaining a diversified portfolio.
See More
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- Dividend Stability: As of January 2026, PCRED's shareholder distribution rate stands at 9.00% per annum, with eleven consecutive months of distributions fully covered by net investment income since inception, enhancing investor confidence and appeal.
- Cost Advantage: PCRED's current private offering does not incur management or performance fees, a strategy that not only reduces investor costs but also increases its attractiveness in a competitive market, particularly among investors seeking stable returns.
- Market Positioning Difference: Unlike equity-focused NAV REITs that prioritize capital appreciation, PCRED focuses on higher-priority, less-volatile credit investments, emphasizing income driven by current and contractual coupons, which allows it to maintain relatively stable performance amid market fluctuations.
See More
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- Outstanding Investment Returns: Since its first investment on February 6, 2025, Prospect Credit REIT (PCRED) achieved an annualized total return of 13.14% as of December 31, 2025, significantly outperforming the Stanger Composite NAV REIT Index's return of 6.50%, demonstrating its strong performance in the real estate credit sector.
- Sustained Dividend Capability: As of January 2026, PCRED's shareholder distribution rate stands at 9.00% per annum, and it has declared eleven consecutive months of distributions since inception, reflecting the stability and sustainability of its investment income.
- Significant Fee Advantage: The current private offering of PCRED does not impose management or performance fees, reducing the cost burden on investors and thereby attracting more participants, which enhances its market competitiveness.
- Diversified Investment Portfolio: PCRED focuses on higher-priority, less-volatile credit investments, providing a more stable income source compared to equity NAV REITs that primarily seek capital appreciation, thus meeting market demands for both safety and yield.
See More
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- Net Investment Income Growth: Prospect Capital reported a net investment income of $91 million or $0.19 per share for Q2, reflecting a 15.5% increase from the previous quarter, demonstrating the company's ongoing profitability and competitive position in its core business.
- Portfolio Optimization: CEO John Barry emphasized the strategic priority of rotating assets into first lien senior secured middle market loans, with the first lien mix increasing by 728 basis points to 71.4% since June 2024, which will enhance the company's risk management and income stability.
- Financial Robustness: CFO Kristin Van Dask reported combined cash and undrawn credit facility commitments of $1.6 billion, showcasing strong liquidity and capital capacity to seize market opportunities and support future growth.
- Ongoing Dividend Commitment: The company announced continued monthly distributions of $0.045 per share to common shareholders, reflecting management's confidence in future cash flows while enhancing investor trust and market appeal.
See More
Prospect Capital Declares Monthly Dividend of $0.045
- Stable Monthly Dividend: Prospect Capital has declared a monthly dividend of $0.045 per share, consistent with previous distributions, indicating the company's stability and commitment to shareholder returns in the current market environment.
- Attractive Yield: The declared dividend corresponds to a forward yield of 20.69%, appealing to income-seeking investors and enhancing the company's attractiveness in the competitive BDC market.
- Dividend Payment Schedule: The dividend is payable on March 19 for shareholders of record on February 25, with subsequent payments scheduled for April 21 and May 19, which further boosts investor confidence in the company's financial management.
- Investor Caution: Despite improvements in total investment income in Q2 compared to Q1, there remains a risk of NAV deterioration, which is critical for long-term investors to consider when evaluating their investment strategies.
See More
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- Attractive Yield: Prospect Capital offers an attractive yield exceeding 8%, yet market sentiment remains cautious regarding its future performance, prompting investors to weigh the high yield against potential risks.
- NAV Deterioration Risk: Despite portfolio adjustments, Prospect Capital still faces risks of net asset value (NAV) deterioration, which could impact its long-term financial stability and investor confidence.
- Investment Red Flags: Analysts have flagged Prospect Capital as a 'red flag' investment, indicating uncertainties in the current market environment, necessitating careful evaluation by investors in their decision-making processes.
- Future Outlook: As the BDC market evolves towards 2026, Prospect Capital's performance will be influenced by broader economic factors, requiring investors to monitor its adaptability and strategic adjustments in response to market changes.
See More
