“An improving exit market translates into distributions back to limited partners, a dynamic the venture industry as a whole has not enjoyed since the financial crisis began in 2008”, so says Mark Heesen, president of the National Venture Capital Association when he delivered his report back on the state of venture capital (VC) in the US in July 2010.
With investors being wary of expected returns from the stock market, some have begun to look at alternative markets such as Venture Capital to try and improve their investment returns.
For dividend seeking investors who are happy to take on a little bit of risk, one stock to look at is Hercules Technology Growth Capital (HTGC) which is listed on the NASDAQ.
Founded in 2003, the company is the leading specialty finance company providing venture debt and equity to venture capital and private equity backed technology and life science companies. The dividend yield is 8.26%.
Since its initial public offering (IPO) in 2005, the company has paid out $157.3m in dividends.
Reporting second quarter financial results in August, the company sent a clear signal to the market that the venture capital sector was once again making investments and looking for opportunities. Hercules (HTGC) closed over $215 million in new commitments, the highest level since the second quarter of 2008. Realized gains came in at $3.4 million. The company also grew net investment income, increased net interest margins to above 11% while also realizing higher effective yield from the investment portfolio of approximately 17%.
During the financial year to date the company repurchased 377708 shares in the second quarter at an approximate average cost of $9.17 per share for a total cost of approximately $3,46m and bringing total repurchases for the year to 402833 shares at an average cost of $9.18 for a total cost of approximately $3.7m.
The fair value of the company’s total investment portfolio at the end of June 2010 was $431.5m as compared to $380m at the end of the first quarter of 2010 (a 13% increase).
Credit quality for the overall portfolio continued to improve, reflecting renewed access to venture financing and improved operating performance for a number of portfolio companies. There was however one total write-off during the period, which decreased net asset value.
For investors seeking something a little different and prepared to wait out the investment cycle, Hercules Technology Growth Capital (HTGC) provides a mixture of high risk and high reward, while still rolling out a very juicy dividend.
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