If you had invested $ 1,000 in potential capital stocks a year ago, this is how much you would have now

Investors who have held stocks in the past year have generally seen large gains. In fact, the SPDR S&P 500 (NYSE: SPY) Total return over the past 12 months is 39.1%. But there is no doubt that some big name stocks have performed better than others along the way.

The great race of Prospect Capital: One company that has been performing very well over the past year has been a business development company Prospect Capital Corporation (NASDAQ: PSEC).

Prospect Capital and many other BDCs are unique investments in that most investors care more about their returns than their gains on the price of their shares. Over the past five years, the Prospect share price has only increased by 4.8% overall, but its total return is 84.2% thanks to its 8.6% return.

Prospect’s yield became even more attractive after the Federal Reserve released an emergency rate cut in March 2023. Investors have few places to turn these days for high-quality returns other than dividend paying stocks.

By law, BDCs must pay out at least 90% of their taxable profits to investors as dividends, which means that Prospect’s return is as secure as its underlying business. The company holds private debt and equity in over 120 different companies in 39 different industries, providing investors with an extremely diverse source of dividend yield.

At the start of 2020, Prospect’s shares were trading at $ 6.47. By early March, the stock had fallen back to $ 5.56, with news of the spread of the COVID-19 virus in China raising concerns about a pandemic in the United States.

Forward-looking stocks hit their pandemic low of $ 3.68 on April 3, days after the rest of the market rebounded from its March lows. However, Prospect took advantage of market momentum from there, rebounding to $ 5.79 in early June.

The recovery in outlook has stagnated at this point for several months, with the stock rebounding around the $ 5 level until around mid-November. Fortunately, investors were still receiving this large dividend for their patience.

Related Link: If You Had Invested $ 1,000 In Naked Brand Shares A Year Ago, Here’s How Much You Would Have Now

Prospect In 2021, Beyond: Prospect saw a rise in January 2021, reaching $ 8.03 in February. The stock has since continued to climb, reaching $ 9.25 in June.

A surprising driver of the stock might be its popularity among Robinhood users. Robinhood investors are generally younger and less experienced investors who have a passion for high risk speculative investments, such as AMC Entertainment Holdings Inc (NYSE: AMC) and Sundial Growers Inc (NASDAQ: SNDL). However, Prospect is one of the top 100 holdings among Robinhood users, who likely appreciate the stock’s huge dividend and affordability.

Prospective investors who bought a year ago and have held their own to this day have received far more than a dividend for their troubles. In fact, $ 1,000 of Prospect shares purchased on July 12, 2020 would be worth approximately $ 1,957 today, assuming reinvested dividends.

Looking ahead, the only analyst covering the stock expects a pullback over the next 12 months. The only analyst has a price target of $ 6 for Prospect, suggesting a 28.6% drop from current levels.

Sallie R. Loera