Published on October 20th, 2025 by Felix Martinez
High-yield stocks pay out dividends that are significantly more than the market average dividends. For example, the S&P 500’s current yield is only ~1.2%.
High-yield stocks can be very helpful to shore up income after retirement. A $120,000 investment in stocks with an average dividend yield of 5% creates an average of $500 a month in dividends.
PennantPark Floating Rate (PFLT) is part of our ‘High Dividend 50’ series, which covers the 50 highest-yielding stocks in the Sure Analysis Research Database.
We have created a spreadsheet of stocks (and closely related REITs and MLPs, etc.) with dividend yields of 5% or more…
You can download your free full list of all securities with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:
Next on our list of high-dividend stocks to review is PennantPark Floating Rate (PFLT)
Business Overview
PennantPark is a Business Development Company, or BDC. It provides mostly debt financing, typically first-lien secured debt, senior notes, second-lien debt, mezzanine loans, or private high-yield debt. It specializes in making debt investments in middle-market companies. To a lesser extent, it also makes preferred and common equity investments. The most recent balance sheet showed that 90% of the company’s total investments were in first-lien senior secured debt.
Source: Investor Presentation
The company’s portfolio is highly diversified, with no particular industry making up more than 8% of the total mix, and the majority comprising less than 3% of the total.
In addition, the company’s portfolio has a floating rate, which opens up its yields to interest rate volatility. This can be good in times of rising rates, but is unfavorable should rates decline.
An overview of the company’s investment philosophy reveals PennantPark prefers middle-market companies with $15 million to $50 million in annual EBITDA and has a high rate of underwriting success.
Only two of the company’s ~160 investments reached the non-accrual stage in the most recent quarter, compared to less than 20 of its investments since inception. PennantPark’s track record of outstanding underwriting is a key advantage, and this outstanding credit quality has helped the company maintain its dividend at the same rate for several years.
Source: Investor Presentation
Above is a sampling of the types of investments the company makes in target companies. Not only are the targets themselves from diverse industries and geographies, but PennantPark has a variety of instruments with which to make its investments.
First-lien secured debt is the preferred instrument given its favorable repayment position, but the company will do revolvers and equity injections as well. This is primarily a floating debt investment firm, however.
Growth Prospects
PennantPark has a track record of successful investments. However, its exposure to floating-rate instruments has caused its average portfolio yield to fall over the past several years. The yield on PennantPark’s portfolio peaked at just over 9% at the end of 2018, but the company faced declines in the subsequent years.
As PennantPark’s portfolio is comprised of floating rate instruments – mostly tied to LIBOR – it benefits when interest rates increase. Low rates over the past decade suppressed the company’s investment income, but the potential for higher rates is a future catalyst.
The company reported EPS of $0.25, missing estimates by $0.04, and revenue of $63.5 million, up 31% year-over-year but slightly below expectations. Net investment income totaled $24.6 million ($0.25 per share), with distributions of $0.31 per share declared.
As of June 30, 2025, the company’s portfolio stood at $2.40 billion, primarily in first-lien secured, variable-rate debt. Net assets were $1.09 billion with NAV per share of $10.96. Leverage remained high, with regulatory debt-to-equity at 1.29x and a weighted average yield on debt investments of 10.4%. During the quarter, PFLT invested $208 million in new and existing portfolio companies while realizing $146 million from sales and repayments.
The company also launched a new joint venture, PennantPark Senior Secured Loan Fund II, with Hamilton Lane, initially funded with $200 million and a $300 million financing facility. PFLT maintains strong liquidity with $102.7 million in cash equivalents and sufficient borrowing capacity. Dividend coverage remains stable, and the company is well-positioned to continue growing its portfolio while managing risk.
Source: Investor Presentation
Competitive Advantages & Recession Performance
PennantPark focuses on first-lien, middle-market loans, giving it priority in repayments and higher yields. Its experienced management, strong deal-sourcing network, and partnerships like the joint venture with Hamilton Lane enable efficient portfolio growth. High exposure to variable-rate debt also allows the company to benefit from rising interest rates, supporting income and dividends.
The company has shown resilience in moderate downturns, but high leverage and a near-100% payout ratio make it vulnerable in severe recessions. Non-accrual loans remain low, yet prolonged economic stress or falling rates could pressure income and dividends. Investors should monitor credit quality and market conditions closely.
Dividend Analysis
PennantPark pays a monthly dividend of $0.1025 per share, translating to an attractive annualized yield of ~14%. Its monthly distribution schedule is a bonus for investors seeking more frequent income.
However, such a high yield warrants scrutiny. While BDCs typically offer elevated yields, PennantPark’s 14% payout is high even by industry standards. The company carries a highly leveraged balance sheet, and its payout ratio often approaches or exceeds 100% of earnings. This model has been sustainable in stable economic conditions, but a prolonged downturn or underperforming loans could threaten the dividend.
Currently, PennantPark’s net investment income (NII) is expected to cover distributions, with a projected payout ratio of 93%. While a dividend cut is not anticipated, any deterioration in credit quality or a drop in interest rates could pressure earnings and make a reduction possible. Investors should recognize that the dividend is not immediately at risk but should be monitored closely, especially given the company’s reliance on floating-rate instruments and high leverage.
Final Thoughts
The old adage “high-risk, high-reward” fits PennantPark well. Its dividend yield is compelling, but a decline in interest rates could put future payouts at risk.
If operations proceed smoothly, the yield alone could deliver nearly double-digit annual returns. However, the company carries significant risk—if investment income growth falters, a dividend reduction may become necessary, though we do not currently expect this.
Investors should proceed with caution. PennantPark is best suited for those with a higher risk tolerance who are comfortable prioritizing yield despite potential volatility.
High-Yield Individual Security Research
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Other Sure Dividend Resources
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- Monthly Dividend Stocks: Individual securities that pay out every month
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- REITs: List of REITs and more
- BDCs: List of BDCs and more