Gladstone Capital (GLAD) 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. Welcome back to BDC Stock Breakdown, the show where we examine business development companies to determine whether their dividends, portfolios, and valuations deserve a place in an income-focused portfolio. Today we're breaking down Gladstone Capital Corporation, trading under the ticker symbol GLAD. Glad. Gladstone Capital is an externally managed BDC that provides debt and equity financing

1:00to lower middle market businesses. Its primary goal is to generate current income through interest payments while also creating the possibility of capital appreciation through equity positions attached to some of its loans. As of March 31st, 2026, Glad's portfolio contained investments in 55 companies across 17 industries in 22 states. The portfolio had a fair value of approximately $907 million, with no individual investment representing more than 10% of the total portfolio. Approximately 91% of the portfolio was invested in debt, while the remaining 9% was invested in preferred stock, common equity, and similar securities. First-lean loans represented about 71% of the portfolio at cost. Second-lean loans represented 20%. An unsecured debt was almost nonexistent.

2:02That is a reasonably defensive structure, because first-lean lenders generally have the strongest claim on a borrower's assets if financial trouble develops. However, the portfolio doesn't, does have some concentration overall. Healthcare, education, and childcare represented 27% of investments at fair value. Diversified manufacturing accounted for another 24%. And diversified services represented about 16%. Those three categories combined made up more than two-thirds of the portfolio. So let's examine the earnings. For the quarter-ending in March 31st, 2026, Gladstone Capital generated approximately $26 million in total investment income. Net investment income came in at $11.8 million,

3:03or $52 cents per share, compared with $0.50 per share during the previous quarter. Shareholders received $0.45 per share in distributions during the quarter. That means net investment income covered the dividend by approximately 116%. This is one of the strongest points in Gladstone's current investment case. The regular distribution was covered by recurring investment earnings, rather than depending entirely on realized gains or feed waivers. Glad currently pays $0.15 per share every month, producing an annual distribution rate of $1.80 per share. Management has already declared that same monthly amount for July, August and September, 2026. At a share price of approximately $19.91, the forward yield is around 9%. The company's net asset value also moved in the right direction. Nav increased from $21.13 to $21.36

4:06per share during the latest reported quarter. With glad trading near $19.91, investors are purchasing the stock at approximately a 7% discount to its last report in Nav. That is not an enormous bargain, but it provides a reasonable margin compared with buying a BDC at its substantial premium. There are still several risks to consider though. First, three portfolio companies were on non-accurral status. Those investments represented 3.4% of the debt portfolio at cost and 1.6% at fair value. The lower fair value percentage indicates that glad has already marched down these troubled investments, but they still represent potential losses and income that is no longer being collected normally. Second, most of glad's loans have floating interest rates. The portfolio's weighted average yield declined from 12.2%

5:10to 11.8% during the latest quarter, primarily because of falling short-term interest rates. Continued rate cuts could reduce interest income unless portfolio growth, lower borrowing costs, prepayment fees, or equity income offset off the decline. Third, I will say that glad is externally managed. To management fees and incentives, servicing fees in financing costs can consume a meaningful portion of investment income. Total expenses after credits increased 37% compared with the same quarter one year earlier, partly because of higher incentive fees, interest expense, and management fees. On the positive side, glad maintain asset coverage of approximately 226% on its debt obligations. Comfortably above the required 150% level. The company was also in compliance

6:11with its credit facility covenants at the end of the quarter. So what's my final rating? I'm gonna give Gladstone Capital Corporation a solid 7.7 out of 10. If you guys think it's unfair, I don't really care. I'm gonna explain myself a little bit here. Glad earns points for its 9% monthly dividend yield, solid dividend coverage, improving nav, mostly secured loan portfolio and modest discount to book value. I'm holding the rating below an eight because of the non-accurral investments, sector concentration, externally managed fee structure and the possibility that lower interest rates will pressure future earnings. Overall, glad appears to be a respectable monthly income BDC at its current valuation, but investors should continue watching dividend coverage, credit quality, and nav in future earnings reports.

7:13College 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 bandwink 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. I will say this. This video is for informational and entertainment purposes only and should not be considered financial advice. Always conduct your own research before purchasing any investment. Also, talk to a financial advisor. Look, financial advisors, I'm not personally a fan of them, but I do think it's a good idea for most people to talk to them. Especially if you don't know what you're doing. It's good to get educated, sure, but I will say this. Any investment that you make is on you, your own risk, no matter what.

8:13And even though none of this is financial advice and just for entertainment purposes only, I encourage you to talk to real professionals. I always think it's a good idea. But I do want to thank you guys for watching the BDC Stock Breakdown. Let me know in the comments whether you own glad in which BDC you would like to see covered next. I am trying my best to make sure I'm reading all the comments that you guys have. And I appreciate every single comment that I see and I'm even truly trying, making every effort to truly reply to all of your guys' comments. I get so many comments and all of the other, and either of these videos or other videos. But on that note, I can't thank you guys enough. You guys are seriously the reason that this channel has gotten as big as it's gotten. And for that, I thank you also make sure that you guys watch the other videos for the BDC report, not BDC reports, all right? So I think that's the end of the BDC Stock Breakdown. We have a ton of, we're making a ton of these videos. I'm trying to make as many as I can. I'm trying to cover every single publicly traded BDC

9:14that I can, all of them, like all, I think it was like 50 total, I'm trying to cover every single one of them. So it's fun to look into these. It's fun to give my best report. You know, if you guys disagree with me, just let me know. Or if you agree with me, let me know. I don't care. I just appreciate you guys' comments and suggestions that are fun to listen to, fun to try to account, but have an incredible day. Catch you guys in the next. Fall has never looked or tasted this good. Sweet Greens Fall Harvest Menu is back with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed brussels, and crave worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon brussels side. The season's most desirable menu has returned to sweet green. Featuring falls best dressed. Make your move. Order on the sweet green app. Episode.