Apollo Investment Corp AINV:NASDAQ

Apollo Investment Corp is similar to American Capital Strategies Ltd (ACAS) that was covered in a prior published post on this website. The Company was founded in 2004 and has a limited operating history. The Company operates much the same way as American Capital Strategies in the sense that they both invest in middle market companies and they fund this investment primarily through debt and stock offerings. Apollo is also a closed-end, non-diversified management investment company that has filed an election to be treated a business development company (BDC) under the Investment Act of 1940. This requires the company to pay out at least 90% of its taxable income in any given year to retain the favorable tax status associated with being a (BDC). As mentioned in an earlier post this is much like the hot to trot Real Estate Investment Trusts of the past 3 to 5 years.

Those investors seeking long-term appreciation with an above average dividend yield should consider both Apollo Investment and American Capital Strategies. At SmartTrades we favor American Capital Strategies over Apollo, however, Apollo has a very attractive dividend yield that for those seeking income should seriously consider.

Company Background

Apollo Investment Corporation (Apollo Investment) is a closed-end, non-diversified management investment company that has filed an election to be treated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940 Act). The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. It intends to invest primarily in middle-market companies in the form of mezzanine and senior secured loans, as well as by making direct equity investments in such companies. During fiscal year ended March 31, 2006 (fiscal 2006), Apollo Investment invested $1.1 billion across 26 new and 10 existing portfolio companies. Investments sold or prepaid, during fiscal 2006, totaled $452.3 million.

Company Fundamentals

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Standard and Poors is currently rating the stock as a "hold" with a 12-month price target of $23. At current prices this does not leave much room for capital appreciation. The company currently has a forward PE ratio of 11.40 and a PEG ratio of 1.05. This is similar to ACAS which has a forward PE Ratio of 11.40 and a PEG Ratio 1.44. For those seeking a high dividend return both companies have attractive dividend yields between 8% to 10%.


Disclosure
* - Currently do not own shares of Apollo
* - No other relationships with the company

Sentiment
HOLD

Related Links

Apollo Downgraded

Apollo Going to $21

Apollo Offering Growth and Income

Questions
What do participants in this forum think of Apollo? Bullish? Bearish?
Do you like American Capital Strategies more than Apollo?
Any other thoughts on Apollo that would be useful for participants of this forum?