Hilliard Lyons Initiates Gladstone Capital with LT Buy on Return Potential

Hilliard Lyons initiates its coverage on Gladstone Capital GLAD with a Long-term Buy rating and a price target of $9 per share. Hilliard Lyons says, "How is Gladstone able to achieve a high dividend yield? 1) Investments/loans are atypical, warranting unusually high rates of interest. The weighted average yield on the interest bearing portion of the portfolio equaled 11.0% at March 31. Compare this return to banks' yield on earning assets of 4.11% for the 1Q12. Yields are further magnified through leverage/borrowed funds. 2) Most of the company's earnings are not subject to federal income tax. Nearly all net income is distributed to shareholders." GLAD closed at $7.76 on Monday.