KCAP Financial (NASDAQ: KCAP) and Invesco Bond Fund (NYSE:VBF) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, valuation, analyst recommendations, earnings, institutional ownership and profitability.

Insider and Institutional Ownership

19.7% of KCAP Financial shares are owned by institutional investors. Comparatively, 23.1% of Invesco Bond Fund shares are owned by institutional investors. 8.0% of KCAP Financial shares are owned by company insiders. Comparatively, 1.0% of Invesco Bond Fund shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

KCAP Financial has a beta of 1.71, suggesting that its share price is 71% more volatile than the S&P 500. Comparatively, Invesco Bond Fund has a beta of 0.21, suggesting that its share price is 79% less volatile than the S&P 500.

Dividends

KCAP Financial pays an annual dividend of $0.48 per share and has a dividend yield of 14.2%. Invesco Bond Fund pays an annual dividend of $0.84 per share and has a dividend yield of 4.3%. KCAP Financial pays out 320.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current ratings and recommmendations for KCAP Financial and Invesco Bond Fund, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KCAP Financial 0 1 1 0 2.50
Invesco Bond Fund 0 1 0 0 2.00

KCAP Financial presently has a consensus price target of $9.75, suggesting a potential upside of 188.46%. Invesco Bond Fund has a consensus price target of $32.00, suggesting a potential upside of 65.29%. Given KCAP Financial’s stronger consensus rating and higher possible upside, equities research analysts plainly believe KCAP Financial is more favorable than Invesco Bond Fund.

Profitability

This table compares KCAP Financial and Invesco Bond Fund’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KCAP Financial 17.53% 7.44% 3.84%
Invesco Bond Fund N/A N/A N/A

Valuation & Earnings

This table compares KCAP Financial and Invesco Bond Fund’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
KCAP Financial $32.54 million 3.82 $5.52 million $0.15 22.53
Invesco Bond Fund N/A N/A N/A N/A N/A

KCAP Financial has higher revenue and earnings than Invesco Bond Fund.

Summary

KCAP Financial beats Invesco Bond Fund on 10 of the 12 factors compared between the two stocks.

KCAP Financial Company Profile

KCAP Financial, Inc. is an internally managed, non-diversified closed-end investment company. The Company has approximately three principal areas of investments. First, the Company originates, structures and invests in senior secured term loans and mezzanine debt primarily in privately-held middle market companies (the debt securities portfolio). In addition, the Company may invest in the equity securities of privately held middle market companies. Second, the Company invests in asset management companies (the Asset Manager Affiliates) that manage collateralized loan obligation funds (CLO Funds). Third, the Company invests in debt and subordinated securities issued by CLOs (CLO fund securities). These CLO fund securities are primarily managed by its Asset Manager Affiliates, but from time-to-time the Company makes investments in CLO Fund Securities managed by other asset managers. The CLO funds typically invest in syndicated loans, high-yield bonds and other credit instruments.

Invesco Bond Fund Company Profile

Invesco Bond Fund is a diversified, closed-end management investment company. The Fund’s investment objective is to seek interest income while conserving capital. The Fund invests primarily in fixed-rate the United States investment-grade corporate bonds with flexibility to integrate approximately 20% of its total assets in non-investment-grade, the United States dollar denominated and non-United States dollar denominated securities of foreign issuers (both developed and emerging markets). The Fund also invests in government securities, asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Fund also invests in derivatives and other instruments that have similar economic characteristics to securities, in which it invests. Invesco Advisers, Inc. serves as the investment advisor of the Fund.

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