Two High-Yield Investments (Reaching 20.9%) That May Be Deceptive (Plus a Reliable 9% Payer)
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 08 2025
0mins
Should l Buy PSEC?
Source: NASDAQ.COM
Bankruptcy Impact on BDCs: The bankruptcy of auto-parts supplier First Brands has raised concerns about business development companies (BDCs), which provide loans to small and mid-sized firms, leading to fears of more issues in the private-credit market.
Caution Against High-Yield BDCs: Investors are advised to be cautious of BDCs like Blue Owl Capital and Prospect Capital Corp, which have high fees and poor long-term performance, making them less attractive despite their high yields.
Alternative Investment Recommendation: The Liberty All-Star Growth Fund (ASG) is highlighted as a better investment option, offering a 9% dividend and a significant discount to NAV, outperforming BDCs in total return.
Upcoming Investment Opportunities: The author plans to release a "mini-portfolio for 2026" featuring four high-yield closed-end funds (CEFs) with an average yield of 9.2% and potential for over 20% price upside, encouraging readers to access this information.
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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.
Prospect Capital to Release Earnings Report
- Earnings Report Schedule: Prospect Capital expects to release its earnings report for the quarter ending December 31, 2025, after market close on February 9, 2026, indicating ongoing performance in investments in middle-market private companies.
- Conference Call Announcement: The company will host a conference call on February 10, 2026, at 9:00 a.m. ET, providing an opportunity for investors to engage directly with management, thereby enhancing transparency and investor confidence.
- Live Webcast Availability: The conference call will be available via a live listen-only webcast on the company's website, ensuring that investors can access real-time information, reflecting the company's commitment to information disclosure.
- Forward-Looking Statements Caution: The press release includes forward-looking statements, cautioning investors that future performance may be affected by unforeseen factors, emphasizing the company's focus on risk management.
See More
Private Credit Market Growth and Risks Coexist
- Market Growth: The private credit market, valued at approximately $2 trillion in 2020, is projected to grow by 50% by early 2025 and could reach nearly $5 trillion by 2029, indicating rapid industry expansion but also inherent risks.
- Credit Risk Warnings: Jeffery Gundlach, CEO of DoubleLine Capital, cautioned that some private credit firms are making 'garbage loans,' while Goldman Sachs CEO Jamie Dimon highlighted overly lenient direct lending standards, suggesting potential credit issues ahead that investors should be wary of.
- Diverse BDC Performance: Prospect Capital's net asset value has significantly eroded, and despite its attractive 19.7% forward dividend yield, its reliance on issuing perpetual preferred stock to raise capital increases fixed payment obligations, potentially jeopardizing the reliability of common stock dividends.
- Quality Investment Opportunities: Ares Capital boasts a portfolio with 61% in first-lien secured loans and a low non-accrual rate of 1.8%, well below industry averages, showcasing its resilience in uncertain market conditions and positioning it as a prime investment choice for cautious investors.
See More
Prospect Capital's Grier Eliasek Discusses Private Credit Investment Opportunities
- Private Credit Strategy: Prospect Capital's President Grier Eliasek highlighted in an AdvisorHub interview that current market conditions present unique investment opportunities in the lower middle market, which are expected to drive the company's growth in this sector.
- Market Condition Analysis: Eliasek noted that despite increasing market volatility, Prospect's 38 years of experience and a team of 150 professionals enable the firm to effectively identify and capitalize on high-yield investment opportunities, thereby enhancing its competitive edge.
- Asset Management Scale: As of September 30, 2025, Prospect and its affiliates manage $7.3 billion in regulatory assets, showcasing their robust capabilities in high-yield debt and equity investments.
- Investor Relations Enhancement: By featuring in AdvisorHub, Prospect Capital not only boosts its brand visibility but also strengthens communication with potential investors, further solidifying its leadership position in the private credit market.
See More
Prospect Capital's Grier Eliasek Discusses Private Credit Investment Opportunities
- Private Credit Strategy: Grier Eliasek, President of Prospect Capital, highlighted in an AdvisorHub interview that current market conditions present unique investment opportunities in the lower middle market, likely attracting increased investor interest.
- Market Experience: With 38 years of experience in high-yield debt and equity investments, Prospect Capital Management demonstrates adaptability in complex market environments through private partnerships and publicly traded closed-end structures.
- Team Strength: Prospect and its affiliates employ a team of 150 professionals focused on credit-oriented investments, committed to providing attractive current income for investors, thereby enhancing the company's competitive position in the market.
- Asset Management Scale: As of September 30, 2025, Prospect and its affiliates manage $7.3 billion in regulatory assets, showcasing their strong capabilities and market influence in the private credit sector.
See More
Prospect Enhanced Yield Fund Declares Cash Distributions for Early 2026
- Cash Distribution Announcement: Prospect Enhanced Yield Fund has declared cash distributions for January, February, and March 2026, with an annualized total distribution of $2.28 per share based on the January 9, 2026 net asset value, indicating the fund's stable income generation capability.
- Distribution Details: Monthly distributions are set at $0.19 per share, with record dates on January 29, February 26, and March 30, and payment dates on February 2, March 2, and April 1, ensuring timely returns for shareholders and enhancing investor confidence.
- Tax Treatment Explanation: The distributions will first be treated as taxable investment company income undistributed from the prior year, followed by current year taxable income, ensuring that tax reporting for shareholders remains unaffected, thereby increasing the fund's transparency.
- Fund Background Overview: As a closed-end fund, Prospect Enhanced Yield Fund focuses on investing in non-mortgage structured credit instruments, managing assets totaling $7.3 billion, showcasing its expertise and market position in high-yield investments.
See More
Prospect Capital Adjourns Annual Meeting to January 15, 2026
- Meeting Adjournment: Prospect Capital held its annual meeting on January 8, 2026, but adjourned it to January 15, 2026, at 4:00 PM due to the need for additional time to solicit shareholder votes, indicating the company's commitment to shareholder engagement.
- Share Overview: As of September 17, 2025, Prospect Capital had 465,087,009 shares of common stock and various preferred stocks outstanding, showcasing a diverse capital structure that helps attract different types of investors.
- Voting Rights Explanation: Each share of common and preferred stock is entitled to one vote at the annual meeting, ensuring that all shareholders have a voice in significant decisions, which enhances corporate governance transparency.
- Investment Objective Statement: As a business development company, Prospect primarily invests in middle-market private companies with the goal of generating current income and long-term capital appreciation, reflecting its strategic positioning in the market.
See More
Prospect Capital to Release Earnings Report
- Earnings Report Schedule: Prospect Capital expects to release its earnings report for the quarter ending December 31, 2025, after market close on February 9, 2026, indicating ongoing performance in investments in middle-market private companies.
- Conference Call Announcement: The company will host a conference call on February 10, 2026, at 9:00 a.m. ET, providing an opportunity for investors to engage directly with management, thereby enhancing transparency and investor confidence.
- Live Webcast Availability: The conference call will be available via a live listen-only webcast on the company's website, ensuring that investors can access real-time information, reflecting the company's commitment to information disclosure.
- Forward-Looking Statements Caution: The press release includes forward-looking statements, cautioning investors that future performance may be affected by unforeseen factors, emphasizing the company's focus on risk management.
See More
Private Credit Market Growth and Risks Coexist
- Market Growth: The private credit market, valued at approximately $2 trillion in 2020, is projected to grow by 50% by early 2025 and could reach nearly $5 trillion by 2029, indicating rapid industry expansion but also inherent risks.
- Credit Risk Warnings: Jeffery Gundlach, CEO of DoubleLine Capital, cautioned that some private credit firms are making 'garbage loans,' while Goldman Sachs CEO Jamie Dimon highlighted overly lenient direct lending standards, suggesting potential credit issues ahead that investors should be wary of.
- Diverse BDC Performance: Prospect Capital's net asset value has significantly eroded, and despite its attractive 19.7% forward dividend yield, its reliance on issuing perpetual preferred stock to raise capital increases fixed payment obligations, potentially jeopardizing the reliability of common stock dividends.
- Quality Investment Opportunities: Ares Capital boasts a portfolio with 61% in first-lien secured loans and a low non-accrual rate of 1.8%, well below industry averages, showcasing its resilience in uncertain market conditions and positioning it as a prime investment choice for cautious investors.
See More
Prospect Capital's Grier Eliasek Discusses Private Credit Investment Opportunities
- Private Credit Strategy: Prospect Capital's President Grier Eliasek highlighted in an AdvisorHub interview that current market conditions present unique investment opportunities in the lower middle market, which are expected to drive the company's growth in this sector.
- Market Condition Analysis: Eliasek noted that despite increasing market volatility, Prospect's 38 years of experience and a team of 150 professionals enable the firm to effectively identify and capitalize on high-yield investment opportunities, thereby enhancing its competitive edge.
- Asset Management Scale: As of September 30, 2025, Prospect and its affiliates manage $7.3 billion in regulatory assets, showcasing their robust capabilities in high-yield debt and equity investments.
- Investor Relations Enhancement: By featuring in AdvisorHub, Prospect Capital not only boosts its brand visibility but also strengthens communication with potential investors, further solidifying its leadership position in the private credit market.
See More
Prospect Capital's Grier Eliasek Discusses Private Credit Investment Opportunities
- Private Credit Strategy: Grier Eliasek, President of Prospect Capital, highlighted in an AdvisorHub interview that current market conditions present unique investment opportunities in the lower middle market, likely attracting increased investor interest.
- Market Experience: With 38 years of experience in high-yield debt and equity investments, Prospect Capital Management demonstrates adaptability in complex market environments through private partnerships and publicly traded closed-end structures.
- Team Strength: Prospect and its affiliates employ a team of 150 professionals focused on credit-oriented investments, committed to providing attractive current income for investors, thereby enhancing the company's competitive position in the market.
- Asset Management Scale: As of September 30, 2025, Prospect and its affiliates manage $7.3 billion in regulatory assets, showcasing their strong capabilities and market influence in the private credit sector.
See More
Prospect Enhanced Yield Fund Declares Cash Distributions for Early 2026
- Cash Distribution Announcement: Prospect Enhanced Yield Fund has declared cash distributions for January, February, and March 2026, with an annualized total distribution of $2.28 per share based on the January 9, 2026 net asset value, indicating the fund's stable income generation capability.
- Distribution Details: Monthly distributions are set at $0.19 per share, with record dates on January 29, February 26, and March 30, and payment dates on February 2, March 2, and April 1, ensuring timely returns for shareholders and enhancing investor confidence.
- Tax Treatment Explanation: The distributions will first be treated as taxable investment company income undistributed from the prior year, followed by current year taxable income, ensuring that tax reporting for shareholders remains unaffected, thereby increasing the fund's transparency.
- Fund Background Overview: As a closed-end fund, Prospect Enhanced Yield Fund focuses on investing in non-mortgage structured credit instruments, managing assets totaling $7.3 billion, showcasing its expertise and market position in high-yield investments.
See More
Prospect Capital Adjourns Annual Meeting to January 15, 2026
- Meeting Adjournment: Prospect Capital held its annual meeting on January 8, 2026, but adjourned it to January 15, 2026, at 4:00 PM due to the need for additional time to solicit shareholder votes, indicating the company's commitment to shareholder engagement.
- Share Overview: As of September 17, 2025, Prospect Capital had 465,087,009 shares of common stock and various preferred stocks outstanding, showcasing a diverse capital structure that helps attract different types of investors.
- Voting Rights Explanation: Each share of common and preferred stock is entitled to one vote at the annual meeting, ensuring that all shareholders have a voice in significant decisions, which enhances corporate governance transparency.
- Investment Objective Statement: As a business development company, Prospect primarily invests in middle-market private companies with the goal of generating current income and long-term capital appreciation, reflecting its strategic positioning in the market.
See More
