WhiteHorse Finance (NASDAQ: WHF) faces worsening portfolio quality and declining earnings, raising doubts about its high 17% dividend yield. Despite trading at a 25.6% discount to net asset value (NAV), these figures reflect underlying risks rather than a buying opportunity.
Over the past year, WHF’s stock price dropped more than 30.7%, and total returns including dividends remain negative at -18.7%. The dividend yield has surged to 17.1%, attracting income-focused investors. However, net investment income is insufficient to cover the dividend, and reliance on spillover income is unsustainable. A dividend cut appears likely and necessary.
WHF’s portfolio, valued at $651 million, is diversified across 74 companies, with the largest sector being Air Freight & Logistics at 5.3%.
Nearly 80% of investments are first lien senior secured loans, offering some protection as these loans have priority in repayment. Still, 8.8% of the portfolio is in non-accrual status—borrowers failing to meet debt payments—up from 6.2% previously, signaling deteriorating portfolio health.
WHF’s floating-rate loans should benefit from higher interest rates, but rising costs may hurt borrowers’ ability to repay, especially amid tariff uncertainties. The current 25.6% discount to NAV is the widest since the 2020 pandemic downturn, reflecting investor concerns.
Analysts have an average price target of $10 per share, suggesting about 11% upside. Yet, with persistent high interest rates and portfolio risks, WHF’s risk-reward profile remains unattractive, supporting a continued sell rating.
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