Carlyle Secured Lending (CGBD) Analysis | BDC Stock Breakdown

0:00College football is back. So, Hilton called to me the superstition concierge to make your fan rituals a reality. Need a room to match your lucky number? We got you. Want to make sure our team doesn't wash your lucky jersey? Oh, that smells lucky. Hilton's unmatched hospitality can keep up with any superstition. Even a marching bandwick up call it 555 and 55 seconds. Hit it! When you need a team that will do whatever it takes on game day, it matters where you stay. Hilton, for this day. All right, everybody. Welcome to the BDC Breakdown, the show where we examine business development companies study their portfolios, and dividends, and then we decide whether their stocks deserve a place in an income-focused portfolio. Today, we're looking at Carlisle secured lending, trading under the ticker symbol CGBD. CGBD currently offers an unusually high dividend yield

1:03and trades at a substantial discount to its reported net asset value that immediately makes it interesting for value and income investors alike. However, the company recently reduced its quarterly dividend and its net asset value declined during the latest quarter. So is CGBD an overlooked income opportunity or is the market discount warning investors about deeper problems? So let's break it down. Carlisle secured lending is an externally managed business development company, focused primarily on lending to middle market business, businesses in the United States. Its objective is to generate current income and to a lesser extent, capital appreciation. The company is managed by a subsidiary, subsidiary of the Carlisle Group, one of the world's largest alternative asset managers.

2:05Carlisle reported approximately $475 billion in assets and her management as of March 31st, 2026, giving CGBD access to a large credit platform, extensive industry relationships and potentially valuable originate or origination network. I can't speak today, thank you guys for your patience. CGBD's investment portfolio had a fair value of approximately $2.3 billion at the end of the first quarter of 2026. The portfolio's weighted average yield was approximately 10%, providing the company with a strong stream of interest income. CGBD also participates in joint ventures that expand its exposure beyond traditional middle market lending. One of these is the middle market credit fund, which held approximately $1 billion in investments

3:08and was almost entirely composed of first-lean floating rate loans. CGBD also helped establish structured credit partners with other Carlisle and six street entities. Sorry, six street lending entities, my bad. That joint venture invests in broadly syndicated, firstly in senior secured loans using predominantly investment grade CLO financing. These joint ventures provide additional diversification and potential earnings growth, structured credit partners is especially interesting because no management or incentive fees are charged at the joint venture or underlying CLO level. Now let's examine the latest earnings. For the first quarter of 2026, CGBD generated 36 cents per share of net investment income.

4:08The company declared a quarterly dividend of 35 cents per share, which means earnings covered approximately 103% of the dividend. Coverage is positive, but the margin of safety is relatively thin. The bigger concern is that management reduced the quarterly dividend from 40 cents to 35 cents. Management explained that the new base dividend was designed to better align the payout with current portfolio earnings while preserving the ability to pay supplemental dividends when earnings improve. A dividend reduction is never ideal for an income investment. However, lowering the payout to a sustainable level is better than continuing to distribute more than the portfolio consistently earns. At a recent share price of approximately $10.60, the 35 cents quarterly dividend produces an annualized yield of roughly 13.2%, that is an extremely attractive yield, but investors should remember that high yields

5:09usually come with elevated uncertainty. Next, we need to discuss net asset value. CGBD finished the first quarter with a net asset value of $15.89 per share, down from $16.26 at the end of 2025. The decline was driven partly by net realized and unrealized investment losses. Although share repurchases added approximately nine cents per share to NAV, with the stock trading around $10.60, investors are purchasing CGBD at approximately a 33% discount to its latest reported NAV. That is the strongest part of the investment case. A discount of this size gives investors a significant valuation cushion. It also allows the company to repurchase its own shares below NAV,

6:11which can increase NAV per remaining share. During the first quarter, CGBD repurchased approximately 1.54 million shares for about $18.5 million. The average repurchase price was approximately $12.04. Still well below the company's NAV. Management also increased the authorized share repurchase program to as much as $300 million. I want to examine the credit quality. At the end of the quarter, non-accurral investments represented approximately 0.9% of the portfolio at fair value, improving from 1.2% at the end of 2025. Approximately 91% of the internally rated portfolio remains in the company's second highest credit category. However, investments carrying a risk rating of three increased from 5.3% to 7.8% of fair value.

7:14That does not necessarily indicate an immediate crisis, but it shows that a larger portion of the portfolio requires closer monitoring. CGBD's net financial leverage stood at approximately 1.06 times. Down from 1.13 times at the end of 2025. The company also reported approximately $642 million of liquidity. That gives management reasonable financial flexibility without placing leverage at an obviously aggressive level. So what are the biggest myths? CGBD has access to Carlisles enormous credit platform, a diversified lending portfolio, managed, manageable non-accurral levels, significant liquidity, and an active share repurchase program. And a stock price far below reported NAV. The biggest weaknesses are the recent dividend reduction

8:16declining NAV limited dividend coverage in signs that part of the portfolio is experiencing increased credit pressure. My final rating for Carlisle secured lending is a 7.3 out of 10. CGBD does look attractive as a higher risk value and income investment. The 13% annualized yield and 33% discount to NAV provide meaningful upside potential, especially if credit quality remains stable, and management continues repurchasing shares. However, I would not place CGBD in the same quality category. Carlis football is back. So Hilton called to me the superstition concierge to make your fan rituals a reality. Need a room to match your lucky number? We got you. Want to make sure our team doesn't wash your lucky jersey? Oh, that smells lucky.

9:17Hilton's unmatched hospitality can keep up with any superstition. Even a marching bandwinkup call it 555 and 55 seconds. Hit it! When you need a team that will do whatever it takes on game day, it matters where you stay. Hilton, for this day. This episode is brought to you by PayPal. You know how a mom's bag has everything? Sunscreen, snacks, a stapler, the new PayPal app is like that, but for your money, shop, pay, manage your account, and earn rewards all in one place. And with purchase protection on eligible items, biometric security, and pass keys, you're protected at every step. Download the new PayPal app to get started. See PayPal.com slash protection terms. Oh, sorry about that. That was the strongest BDCs in the market. Before giving it a higher rating, I would want to see nav stabilize. The new dividend remained, the new dividend remained consistently covered

10:18and fewer investments migrate into weaker risk categories. For investors willing to accept additional risk in exchange for a high yield and deeply discount evaluation, CGBD deserves consideration. For more conservative dividend investors, it may be better treated as a small position rather than a core holding. So that's pretty much how it is for me. I have it in a small position, nothing crazy. But it's a 7.3 out of 10 for sure. But this has been the BDC stock breakdown. Remember that this video is for informational purposes only and should not be considered financial advice. Always complete your own research before buying or selling any investment. Also, talk to a financial advisor. They're not bad to talk to you. I do want to thank you again. Like, share, and subscribe. I'll see you guys in the next episode. Booking God calm is the easiest way

11:20from a day surrounded by noise. To a state surrounded by nature. That's nice. Go on, book it. It's easy. Booking.com. Booking. Yeah.