The company pays an attractive dividend that it has increased annually every year since its IPO in 1997.
The company's stock has outperformed the larger stock market in all but one year since going public.
The company has shown robust operations over its public history, a period that spans a previous credit crisis in 1998 (LTCM, Russian default, Asian currencies), a stock market implosion with the dot-com bust in 2000 and the recession that followed in 2001/2002. This suggests the company will hold up even if an American economic slowdown is on its way.
Conservative approach to building assets combined with a shareholder friendly stance as evidenced by the DRIP discount.
AmCap's ability to buy out companies as well as providing debt financing (One-Stop Buyout) gives it an advantage over other BDCs and private equity funds.
The company estimates it has one of the lowest costs of capital in the business (8 - 10% vs. 15 - 20% for private equity funds).
Current market turmoil could present bargain opportunities.
Historically, dividend payouts have been mostly covered by NOI, give or take a few percentage points. The company also pays a small tax penalty to retain earnings, thus cushioning any impact to future dividends.
Over the last few years, AmCap has steadily moved up the capital structure in their portfolio investments. Senior debt is now the largest component of their portfolio (@ ~30%) as opposed to subordinated debt (~20%)or equity. In 2001, subordinated debt dominated their portfolio at over 50%.
ACAS' balance sheet currently has a cash cushion of just over $37 million. The debt they carry though, amounts to over $4 billion. This is prudent leverage on the assets that the firm has under management, and the annual operation margin (for a trailing 12-month period) is a strong 72%. Despite the accounting write downs, cash flow is still very strong in this company, with over $400 million in operating cash flow on a trailing 12-month basis.
Revenue declines will bottom in '08, and next year (2009) a return to high annualized revenue levels of about $1.3 billion. This estimate is in line with the analysts' best guesses as well, although some 2009 revenue estimates range as high as $1.5 billion. This is a great long term opportunity as it makes its transition through the trough of the financial crunch.
ACAS pays a significant dividend to its shareholders, with the latest distribution being $0.31 per share payed for the most recent quarter. Annualized, that's at least a 5% dividend yield on today's price of $22 per share.
The company itself is working to change the market's assessment of its business. Management has argued that it is incorrectly lumped in with the low-multiple BDC sector. They point out that their private equity business and asset management segment warrant multiples closer to groups like Fortress Investment Group or the Blackstone Group.