8.1%-Yieler had a record year; More soon
TRIN stock could be ideal for dividend investors
If you need capital to take your growth-stage business to a new level, Trinity Capital Inc. (NASDAQ:TRIN) may be the company you are looking for. Or, if you’re a dividend-equity investor looking to ride a wave of success, shares of Trinity Capital could be your ally.
Trinity Capital is a business development company (BDC) that provides term loans and equipment financing to growth-stage businesses. Growth-stage companies are defined as having active sponsors, achieving annual revenues of up to $100.0 million, and no longer having early-stage development risks. (Source: “Fourth Quarter and Full Year Presentation”, Trinity Capital Inc, last accessed March 10, 2022.)
TRIN shares went public in early 2021, but the company has been around for 14 years. It has a proven track record of serving a multi-billion dollar underserved niche market. So far, Trinity Capital Inc has completed 221 investments totaling $1.7 billion and completed 131 exits.
BDC’s extensive partner portfolio consists of companies operating in sectors such as software, Internet of Things (IoT), energy and efficiency, consumer and retail, healthcare healthcare, cleantech, semiconductors and hardware, chemicals and fuels, and business services. His portfolio currently includes Axiom Space, Inc., Impossible Foods Inc., Nexus Systems, LLCand Suniva Inc. (Source: “Meet Our Partners”, Trinity Capital Inc, last accessed March 10, 2022.)
Recent investment activity of Trinity Capital Inc.
You have to spend money to make money, and Trinity Capital is good at that. For the fourth quarter of 2021, it reported $248.0 million in new commitments, bringing its total commitments for that year to a record $757.0 million. (Source: “Trinity Capital Inc. Reports Fourth Quarter and Full Year 2021 Financial Results“, Trinity Capital Inc., March 3, 2022.)
At the end of February 2022, BDC provided Cepton Technologies, Inc. with a $25.0 million credit facility. The transaction was completed before the company merged with Growth capital acquisition company form Cepton inc. (NASDAQ: CPTN). (Source: “Trinity Capital Inc. provides $25 million in growth capital to Cepton Technologies, Inc.” Trinity Capital Inc, February 28, 2022.)
Cepton Inc. provides light detection and ranging (lidar) based software for automotive, smart city, smart space, and smart industrial applications in the United States and globally. Cepton is expected to use the Trinity Capital loan to scale its operations to meet growing demand.
On the sell side, Trinity Capital announced that it will receive approximately $59.8 million in net proceeds from the sale of its equity investments in Lucide Group Inc. (NASDAQ: LCID) and Matterport Inc (NASDAQ: MTTR). (Source: “Trinity Capital Inc. to receive $59.8 million in net proceeds from the sale of certain equity investments”, Trinity Capital Inc., February 2, 2022.)
Trinity Capital initially invested in the two companies for a total cost of approximately $9.0 million. After liquidating its position in the two companies, Trinity Capital expects to make a 464% gain of $50.8 million.
The net gains from the sale represent capital gains of $1.86 per share, which will help Trinity Capital shares generate significant shareholder value. The company’s board of directors is evaluating its dividend plan for 2022 and beyond to ensure that investment returns are properly distributed to its shareholders and support the company’s long-term growth strategy.
Fourth quarter and full year 2021 results
For the fourth quarter ended December 31, 2021, Trinity Capital reported that its total investment income increased 53.9% year-over-year to $23.6 million. Its net investment income more than doubled in the quarter to $10.6 million, or $0.39 per share. (Source: Trinity Capital Inc, March 3, 2022, op. cit.)
The company’s investment income for the full year 2021 increased 49.5% year over year to $82.2 million. Its net investment income for the full year rose 67% to $39.0 million, or $1.50 per share. Net growth in the company’s investment portfolio for the full year was $379.8 million, a year-over-year increase of 76.9%. Trinity Capital Inc’s full-year net asset value increased 25.9% year-on-year, from $13.03 to $16.40 per share.
“Following our Nasdaq listing earlier this year, we delivered on our promises, achieved consecutive net growth in our portfolio and generated a record total of $757.0 million in new commitments,” said Steven Brown, President -Chief Executive Officer of Trinity Capital Inc. “In 2022, we expect to continue this momentum with strategic decisions aimed at achieving our primary objective of maximizing shareholder return.” (Source: ibid.)
Trinity Capital Inc has increased its dividend every quarter since its inception
Trinity Capital’s strong year helped TRIN shares reward investors with growing dividends. In the first quarter of 2021, shares of Trinity Capital paid $0.28 per unit. This jumped to $0.29 in the second quarter, $0.33 in the third quarter and $0.36 in the fourth quarter.
The growing dividend of TRIN stock is more than safe. Trinity Capital Inc’s payout ratio is only 36.5%. Additionally, the company’s fourth-quarter net investment income of $0.39 per share easily covered its quarterly dividend of $0.36.
This bodes well for the possibility of further dividend increases in 2022, especially in light of the recent exits of Trinity Capital Inc from Lucid Group Inc and Matterport Inc.
- 10% over three months
- 15% in the last six months
- 25% year over year
While Trinity Capital’s stock is up just 1.5% in 2022 at the time of this writing, that’s much better than the Nasdaq, which is down 15.4%; the S&P 500, down 10.2%; and the Dow Jones Industrial Average, which is down 8.0%.
Chart reproduced courtesy of StockCharts.com
Wall Street analysts’ outlook for TRIN stock is strong, with a 12-month average price target of $20.13 and a high estimate of $21.00. This represents potential gains of 13.7% and 18.6%, respectively.
However, Wall Street analysts tend to be quite conservative. A 12-month goal of $24.50 is certainly within reach. That would represent a gain of 38.5% from the current level, around 50% since I last wrote about Trinity Capital Inc in December 2021, and 235% since I profiled the company in April 2021.
The Truth About Trinity Capital Stocks
In the words of the CEO of Trinity Capital Inc, the company “had a banner year in 2021”. And that momentum is set to continue into 2022. The company continues to perform on all fronts, with record rollouts, rising quarterly dividends, and a rising share price.
What more can an investor ask for in an ultra-high yielding stock?