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Why Investors Should Hold Blue Owl Capital (OBDC) Stock for Now
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Blue Owl Capital Corporation (OBDC - Free Report) , a business development company, is well-poised to grow on the back of strong credit performance, rising net investment income, strategic acquisitions and new investment commitments. Headquartered in New York, Blue Owl Capital has a market cap of $6.1 billion.
OBDC lends funds to U.S. middle market companies, and at the first-quarter end, it had $12.4 billion of loans to 198 portfolio companies. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper & check the positives for the stock.
An Outperformer: A glimpse at the company’s price trend reveals that the stock has had an impressive run so far this year. Shares of OBDC have returned 5.7% against the 0.6% decline of the industry it belongs to.
Image Source: Zacks Investment Research
Zacks Estimate Story: The Zacks Consensus Estimate for OBDC’s 2024 earnings is pegged at $1.88 per share, which remained stable over the past week. Blue Owl Capital beat on earnings in three of the last four quarters and missed once, with an average surprise of 3.2%. The consensus mark for current-year revenues stands at nearly $1.6 billion.
Our estimate indicates that a significant increase in dividend income will likely support the top line. We expect the company’s non-controlled dividend income to rise nearly 16% in 2024. As a significant portion of its assets are floating in nature, the high-interest rate environment is expected to support its investment income.
Factors to Consider: The company has a diversified portfolio with balanced weightage in different industries, which helps it mitigate risks. This is expected to help it navigate through tough times. Its work to rebuild momentum in specialty finance following the post-Covid period is noteworthy.
The company’s focus on increasing shareholder value is commendable and much liked by dividend investors. Apart from providing regular dividends of 37 cents, Blue Owl Capital also offers a quarterly supplemental dividend, which is directly linked to its profits. Last reported quarter, the supplemental dividend amounted to 5 cents per share.
This is expected to help the company avoid future capital constraints. Its dividend yield of 9.5% is substantially higher than the industry average of 2.1%. Additionally, it had a remaining share repurchase fund of $150 million at the first-quarter end.
The stock is currently trading at a discount. Its forward 12-month price-to-earnings ratio of 8.56X is below the industry average of 12.97X. The company's underlying fundamentals are not weak at all, as evidenced by a Value Score of B. These positive factors are likely to help it maintain its share growth trajectory and continue outperforming the industry, making it an excellent candidate to hold.
Key Risks
However, there are a few factors that investors should keep an eye on.
Its rising expenses on the back of higher interest costs might constrain profit growth. In the first quarter, the metric jumped 14.6% year over year. The total operating expense, as a percentage of total investment income, rose to 52.9% in the first quarter from 52% in the year-ago period. Also, its return on equity of 12.6% is lower than the industry average of 20.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
The Zacks Consensus Estimate for Hut 8’s current-year earnings is pegged at $2.50 per share, which witnessed one upward estimate revision in the past 60 days against no downward movement. The consensus mark for HUT’s current year revenues suggests a 55.9% jump from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 51.4% year-over-year growth. During the past two months, WT has witnessed one upward estimate revision against none in the opposite direction. It met earnings estimates thrice in the past four quarters and beat once, with an average surprise of 2.3%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 29.1% year-over-year improvement. During the past 30 days, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current year revenues suggests a 36.2% jump from a year ago.
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Why Investors Should Hold Blue Owl Capital (OBDC) Stock for Now
Blue Owl Capital Corporation (OBDC - Free Report) , a business development company, is well-poised to grow on the back of strong credit performance, rising net investment income, strategic acquisitions and new investment commitments. Headquartered in New York, Blue Owl Capital has a market cap of $6.1 billion.
OBDC lends funds to U.S. middle market companies, and at the first-quarter end, it had $12.4 billion of loans to 198 portfolio companies. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper & check the positives for the stock.
An Outperformer: A glimpse at the company’s price trend reveals that the stock has had an impressive run so far this year. Shares of OBDC have returned 5.7% against the 0.6% decline of the industry it belongs to.
Image Source: Zacks Investment Research
Zacks Estimate Story: The Zacks Consensus Estimate for OBDC’s 2024 earnings is pegged at $1.88 per share, which remained stable over the past week. Blue Owl Capital beat on earnings in three of the last four quarters and missed once, with an average surprise of 3.2%. The consensus mark for current-year revenues stands at nearly $1.6 billion.
Our estimate indicates that a significant increase in dividend income will likely support the top line. We expect the company’s non-controlled dividend income to rise nearly 16% in 2024. As a significant portion of its assets are floating in nature, the high-interest rate environment is expected to support its investment income.
Factors to Consider: The company has a diversified portfolio with balanced weightage in different industries, which helps it mitigate risks. This is expected to help it navigate through tough times. Its work to rebuild momentum in specialty finance following the post-Covid period is noteworthy.
The company’s focus on increasing shareholder value is commendable and much liked by dividend investors. Apart from providing regular dividends of 37 cents, Blue Owl Capital also offers a quarterly supplemental dividend, which is directly linked to its profits. Last reported quarter, the supplemental dividend amounted to 5 cents per share.
This is expected to help the company avoid future capital constraints. Its dividend yield of 9.5% is substantially higher than the industry average of 2.1%. Additionally, it had a remaining share repurchase fund of $150 million at the first-quarter end.
The stock is currently trading at a discount. Its forward 12-month price-to-earnings ratio of 8.56X is below the industry average of 12.97X. The company's underlying fundamentals are not weak at all, as evidenced by a Value Score of B. These positive factors are likely to help it maintain its share growth trajectory and continue outperforming the industry, making it an excellent candidate to hold.
Key Risks
However, there are a few factors that investors should keep an eye on.
Its rising expenses on the back of higher interest costs might constrain profit growth. In the first quarter, the metric jumped 14.6% year over year. The total operating expense, as a percentage of total investment income, rose to 52.9% in the first quarter from 52% in the year-ago period. Also, its return on equity of 12.6% is lower than the industry average of 20.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
Key Picks
Investors interested in the broader Finance space may look at some better-ranked players like Hut 8 Corp. (HUT - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) , each carrying a Zacks Rank #2 (Buy) now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Hut 8’s current-year earnings is pegged at $2.50 per share, which witnessed one upward estimate revision in the past 60 days against no downward movement. The consensus mark for HUT’s current year revenues suggests a 55.9% jump from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 51.4% year-over-year growth. During the past two months, WT has witnessed one upward estimate revision against none in the opposite direction. It met earnings estimates thrice in the past four quarters and beat once, with an average surprise of 2.3%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 29.1% year-over-year improvement. During the past 30 days, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current year revenues suggests a 36.2% jump from a year ago.