Monthly Dividend Stock In Focus: Gladstone Capital – Sure Dividend

Up to date on April twenty third, 2026 by Nathan Parsh

Enterprise improvement firms, or BDCs, are engaging funding autos for income-generating buyers. They typically distribute most of their earnings to shareholders and, because of this, sometimes have very excessive yields.

Gladstone Capital Company (GLAD) is a BDC with a present dividend yield of 9.5%. It’s one in every of ~140 shares with a 5%+ dividend yield.

You may see the total listing of established 5%+ yielding shares right here.

Together with Gladstone Capital, 119 shares pay dividends every month versus the extra conventional quarterly or semi-annual cost schedules.

You may obtain our full Excel spreadsheet of all 119 month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink under:

Gladstone Capital’s dividend yield is larger than the remainder of the market. The S&P 500 Index, on common, has a dividend yield of simply 1.1%.

Nonetheless, a excessive yield isn’t sufficient if the underlying enterprise is weak or the dividend is susceptible to being lower. This text will focus on whether or not or not Gladstone Capital is an effective funding choice for earnings buyers.

Enterprise Overview

Gladstone Capital operates as a Enterprise Improvement Firm and invests in debt and fairness securities, producing earnings primarily from its debt investments.

These investments are made by way of varied fairness (~10% of portfolio) and debt devices (~90% of portfolio), usually with very excessive yields. Mortgage dimension is usually within the $7 million to $30 million vary, with phrases of as much as seven years.

Gladstone Capital chooses targets in steady industries with sustainable margins, money flows, and favorable progress traits.

The corporate focuses on non-cyclical and non-financial firms to keep away from peaks and valleys in its goal firms’ earnings. These firms have management positions of their respective industries, progress potential, and annual EBITDA between $3 million and $15 million.

Gladstone Capital’s said objective is to maintain paying its hefty dividends to shareholders. Due to this fact, it’s essential that its funding portfolio continues to generate curiosity and dividend earnings and capital beneficial properties in extra of its working and monetary bills.

It has a diversified portfolio, each by way of deal sourcing and trade teams.

Fairness investments embrace most popular or widespread inventory. Gladstone Capital seeks to keep up a 90% – 10% break up between debt and fairness investments.

Gladstone reported Q1 2025 earnings on February fifth, 2026.

Supply: Investor Presentation

Web funding earnings got here to $0.50 per share, which matched final 12 months’s end result. Complete funding earnings, which is akin to income, grew 2.4% year-over-year, largely on account of beneficial properties in different earnings. Curiosity earnings was $23.9 million.

Complete bills have been up $800K than the year-ago interval, with larger curiosity bills and administration charges driving the rise. NAV declined from $21.34 per share to $21.13. Complete belongings have been $923 million, or $903 million at truthful worth. Gross leverage was 93.3% of web belongings.

The corporate invested $37.8 million in two new portfolio firms and $61.3 million in present portfolio firms. Administration said that its pipeline of late-stage offers stands at “over $100 million” and will greater than offset current repayments. Widespread inventory distributions totaled $0.45 per share.

For the 12 months, Gladstone is projected to provide NII of $1.95 per share, up from $1.90 beforehand.

Development Prospects

Rising rates of interest are one in every of Gladstone Capital’s most compelling progress catalysts. The corporate advantages from larger rates of interest as a result of most of its debt portfolio is in variable-rate securities. We don’t anticipate rates of interest to rise within the near-term, which may place a cap on the corporate’s outcomes.

Trying additional again, Gladstone has had a tough time producing progress. Gladstone’s share issuances have funded larger NII in greenback phrases however haven’t earned sufficient above its price of capital to maneuver the needle on NII-per-share. Given this historical past, we estimate Gladstone’s annual progress price to be 0.0% for the following 5 years.

The yields on the corporate’s portfolio affect its potential to earn earnings, cowl bills, and pay distributions to shareholders.

Gladstone Capital will purpose to proceed rising its new investments and including new firms to the full portfolio. Over time, the corporate’s portfolio yield has decreased 30 foundation factors to 12.2%.

Regardless of the rising price of funding, Gladstone has managed to extend its yield spreads. Gladstone’s portfolio continues to develop in greenback phrases, however lending spreads proceed to contract.

Dividend & Valuation Evaluation

Gladstone Capital pays a month-to-month dividend, which permits shareholders to obtain 12 dividend funds per 12 months, extra regularly than 4 quarterly distributions.

GLAD at present pays a month-to-month dividend of $0.15 per share. The annualized dividend payout of $1.80 per share is down from final 12 months’s complete, however represents a present dividend yield of 9.5%.

We consider Gladstone Capital’s present dividend is sustainable. The Firm has a stable observe document of regular payouts, even through the Nice Recession of 2008-2009. Because of its tax classification and favorable fundamentals, the corporate can preserve its excessive yield.

BDCs are required to distribute not less than 90% of any taxable earnings. This eliminates earnings tax on the company degree, permitting capital beneficial properties to be handed by means of to shareholders, just like a REIT.

With a projected dividend payout ratio of 92% for 2025, Gladstone Capital’s dividend payout seems to be safe however with out a lot cushion. BDCs will at all times have excessive payout ratios as a result of tax rule of distributing practically all of their earnings, however general, the dividend protection is tight.

This implies the corporate might not be capable to maintain a significant financial downturn and preserve its dividend. Consequently, if one other important monetary disaster happens, Gladstone Capital’s dividend could possibly be in additional jeopardy.

Assuming continued financial progress, its dividend seems to be sustainable. Nonetheless, the excessive payout ratio introduces a comparatively excessive threat to its sustainability, significantly throughout a recession.

With shares buying and selling at $18.88, the inventory has a price-to-NII ratio of 9.7, which is barely under our 2031 goal a number of of 10.0. Reverting to our goal a number of would add 0.6% to annual returns over the following 5 years.

In complete, we undertaking complete returns of 8.7% per 12 months by means of 2031.

Ultimate Ideas

Traders ought to method excessive dividend yields with warning. Though excessive yields are commonplace within the BDC asset class, many have lower their dividends over the previous few years.

For its half, Gladstone Capital decreased its dividend modestly in 2020 however has since grown it above its pre-COVID degree. For now, we don’t consider one other dividend lower is imminent.

Nonetheless, buyers should pay shut consideration to the corporate’s future earnings studies. It has a really tight payout ratio, and any important deterioration within the efficiency of its funding portfolio may threaten the dividend.

Whereas the excessive yield and month-to-month distributions are engaging, we price shares of Gladstone Capital as a promote on account of current dividend reductions.

Don’t miss the assets under for extra month-to-month dividend inventory investing analysis.

And see the assets under for extra compelling funding concepts for dividend progress shares and/or high-yield funding securities.