Portman RidgeImage source

Investment Thesis

Too many unknowns leave Portman Ridge Finance Corporation (PTMN) unsuitable for the risk-averse investor. Recent management changes and the anticipated merger with Garrison Capital (GARS) add a considerable amount of uncertainty for future performance. This is especially true given the new management’s lack of experience and PTMN’s disappointing historical performance.

Dividend Sustainability

Currently, PTMN pays $0.24 per share in dividends, annually. That translates to an 18% forward dividend yield. The sustainability of this dividend relies on two conditions:

  1. Affordable payout ratio
  2. Healthy portfolio

PTMN historically distributed more cash to shareholders than it earned. As a result, PTMN lowered its dividends every year since 2013 to try to match the income it brings in with the dividend it pays out to investors. At a $0.06 quarterly dividend, PTMN seems to have finally found its balance.

Source: Graph created by the author. Data is sourced from the company’s financial statements.

PTMN Portfolio

PTMN’s dividend sustainability depends on more than a payout ratio that is below 100%. A healthy portfolio is paramount to that end. PTMN manages $281 million worth of investments. Below is a portfolio breakdown by type and product mix.

Source: Investors’ presentation

PTMN has a relatively small stake in equity, which is a good thing. Equity is riskier than debt securities. Gladstone investment corporation’s (GAIN) revenue decreased by 40% in Q2, as portfolio companies suspended dividend distributions during the pandemic. During the same period, PTMN revenue increased by 6% because of limited exposure to equity and the expansion of the investment portfolio through borrowing.

CLO investments are also extremely risky. This is demonstrated by the ~50% decrease in PTMN’s revenue from these vehicles in Q2 as shown below:

Source: Company financial statements

Second lien loans constitute 40% of PTMN’s debt investments. This is a high percentage.

ERIE, Pa., Oct. 12, 2020 /PRNewswire/ — Whether shopping for electronics, furniture or a new car, we all love getting the most bang for our buck – and insurance companies know drivers are looking for bargains when it comes to their car insurance. That’s why many insurers advertise low monthly rates to convince customers they’re getting a great deal. But in the event of an accident, that super-cheap auto insurance might leave you stuck paying out of pocket for car repairs or medical bills.

Cheap auto policies can often fall short, but there are ways to save on your premium without compromising your coverage.

Erie Insurance helps sort it out with a four ways cheap auto policies often fall short, and nine ways to save on your premium without compromising your coverage.  

What are the downsides?

  • You could pay more out of pocket later. When you’re found at-fault for an accident, you’re on the hook to pay for anything your insurance policy doesn’t cover. The cost of repairs, medical bills or legal fees from a multi-car pileup can get expensive. Even something simple like a fender bender can cost thousands of dollars in parts alone.
  • You take on more risk. If you run out of cash to pay what you’re responsible for, that could put your savings, investments or assets like your home or car at risk.
  • You get fewer perks. You typically pay a little extra in premium for features like rental car expense coverage, emergency roadside service coverage or a diminishing deductible. But you’ll be happy to have those little extras there when you need them.
  • It’s less personalized. A good insurance agent can help tailor your policy with endorsements and other optional add-ons to be just the right fit for your life. For example, customized coverage can come in handy when you drive occasionally for Uber or Lyft.
  • Ways to save with ERIE:

    Making your retirement money last is imperative to enjoying financial security in your later years. Unfortunately, far too many retirees make major mistakes that could leave them at risk of running short of cash. Here are four big errors that could leave you broke.

    1. Withdrawing too much too fast from your retirement accounts

    To make sure your retirement money doesn’t run short, you can’t afford to drain your account too quickly. Taking too much money out impairs the ability of your money to work for you. When you have too little invested to earn reasonable returns, your accounts will empty out fast.

    Sad older man sitting alone at table.

    Image source: Getty Images.

    To make sure this doesn’t happen, decide on a safe withdrawal strategy that makes sense for you. Experts recommended the 4% rule for years, but with interest rates so low now and life spans getting longer, this approach leaves you at serious risk of running short.

    The Center for Retirement Research at Boston College instead recommends calculating your withdrawal rate based on tables the IRS prepares to help you figure out required minimum distributions. If you want to simplify things, though, you could always just decide on a lower withdrawal rate, such as taking 3% of your account balance out in the first year of retirement and then adjusting withdrawals to keep pace with inflation each year thereafter.

    2. Investing too conservatively (or not conservatively enough)

    As a retiree, you need to maintain the appropriate asset allocation. If you invest too conservatively because you’re scared of incurring losses, you could earn very low returns, causing your nest egg to dwindle too fast. On the other hand, if you’re overexposed to potentially volatile stocks, you could experience outsize losses.

    To make sure you have the right mix of investments, subtract your age from 110.

    DEEP DIVE



    a sign in front of a building: D.A. Davidson senior analyst David Konrad recommends buying shares of Morgan Stanley and J.P. Morgan Chase because of their varied business mixes, strong capital and an expected decline in credit costs.


    © Getty Images
    D.A. Davidson senior analyst David Konrad recommends buying shares of Morgan Stanley and J.P. Morgan Chase because of their varied business mixes, strong capital and an expected decline in credit costs.

    (Updates article with comments from David Konrad of D.A. Davidson about Morgan Stanley’s deal to acquire Eaton Vance and loan-loss provisioning activity.)

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    Bank stocks typically drop during recessions. This time around, with the big players well-capitalized, largely free from the worst of loan loss set-asides and benefitting from a rebounding economy, investors may be looking at an opportunity staring them in the face.

    And the biggest banks have clear advantages: fees from investment banking and asset management. (Below are tables showing expected and historical provisions for loan losses, non-interest income, earnings per share and analysts’ ratings for the largest dozen U.S. banks.)

    The hot space — asset management

    Morgan Stanley (MS) has been making moves to become a premier asset manager. On Thursday, the firm said it would acquire Eaton Vance Corp. (EV) for $7 billion in cash and stock. Eaton Vance had $507 billion in assents under management as of July 31, and Morgan Stanley said the merger would bring assets under management for its Morgan Stanley Investment Management unit to $1.2 trillion.

    Just on Oct. 2, Morgan Stanley completed its acquisition of discount broker E-Trade Financial. At that time, the bank said the firm’s total assets under management (AUM) had risen to $3.3 trillion. That makes for a pro forma total of $3.8 trillion in AUM, assuming the Eaton Vance acquisition is completed following regulatory approval.

    A Twitter posting from Stephanie Link of HighTower Advisors underlined how hot the asset management business is:

    Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

    • You can open a BMO Harris (Member FDIC) bank account at one of over 500 branches in nine states, or online from around the US.
    • BMO Harris is a good brick-and-mortar bank, but if you’re looking to bank online, you’re better off with an online-only bank that pays higher rates.
    • The bank pays higher CD rates than most brick-and-mortar banks, but you’ll need $5,000 to open an account.
    • See Business Insider’s picks for the best CD rates »

    Is BMO Harris the right fit for you?

    You might like BMO Harris if you … You might not like BMO Harris if you …
    • Live near a branch, OR are comfortable banking digitally
    • Are looking for low or no monthly fees
    • Have $5,000 to open a CD or money market account
    • Want a money market account that comes with paper checks and a debit card
    • Don’t live near a branch, AND you’re not comfortable banking digitally
    • Want to earn high interest rates
    • Are worried about overdraft fees
    • Can’t afford the opening deposits for CDs and money market accounts

    The bottom line: BMO Harris is a solid option if you want to bank in person, but you can find other online banks with better interest rates and lower minimum deposits.

  • Details
  • Pros & Cons

    • Over 500 branches in 9 states, but you can open an account online nationwide
    • Waive $5 monthly service fee if you maintain a $100 daily balance, OR are under age 25
    • Interested compounded daily, paid quarterly
    • FDIC insured
    Pros
    • Low minimum opening deposit of $25
    • No monthly maintenance