This article first appeared on GuruFocus .
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GAAP Net Investment Income:$0.26 per share.
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Core Net Investment Income:$0.27 per share, excluding estimated excise taxes.
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Total Realized Income:$0.29 per share, including $750,000 in realized gains on one equity position.
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Net Asset Value Decrease:$0.28 per share, due to $0.08 per share of dividend payments exceeding earnings and $0.20 per share net realized and unrealized loss.
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Investment Portfolio at Fair Value:$990 million across 116 portfolio companies, down from $1.01 billion across 115 companies as of December 31, 2025.
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New Investments:$18 million in three new portfolio companies.
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Full Repayments:$35 million received from three full repayments.
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Non-Accrual Loans:Loans to six portfolio companies, comprising 9.2% of total cost and 5.2% of fair value of the total investment portfolio.
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Dividends Declared for Q2 2026:$0.34 per share in aggregate, payable monthly.
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Share Repurchase Program:Up to $20 million, reflecting a 25% discount to net asset value.
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Projected Portfolio Growth Capacity:Increase by $75 million to $100 million.
Release Date: May 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Stellus Capital Investment Corp ( NYSE:SCM ) generated $0.26 per share of GAAP net investment income and $0.27 per share of core net investment income, excluding estimated excise taxes, for the first quarter.
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The company realized gains of $750,000 on one equity position, resulting in total realized income of $0.29 per share for the quarter.
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Stellus Capital Investment Corp ( NYSE:SCM ) has a strong portfolio with 99% of loans secured and 92% priced at floating rates, providing stability in a fluctuating interest rate environment.
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The company announced a $20 million share buyback program, reflecting confidence in its valuation and a commitment to generating shareholder value.
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Stellus Capital Investment Corp ( NYSE:SCM ) is optimistic about future growth opportunities, projecting the capacity to increase its investment portfolio by $75 million to $100 million, supported by a potential third SBIC license and recycling equity gains.
Negative Points
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Net asset value decreased by $0.28 per share during the quarter, primarily due to dividend payments exceeding earnings and net realized and unrealized losses related to debt investments.
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The level of non-accrual loans is higher than desired, with loans to six portfolio companies on non-accrual, comprising 9.2% of the total cost and 5.2% of the fair value of the total investment portfolio.
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The company expects dividends to be lower in the future, aligning with net investment income plus realized gains, which may be below the current dividend level.
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Despite the share buyback program, no shares were repurchased in the first quarter due to limited repurchase windows.
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The competitive nature of the market has led to stable, rather than widening, spreads, which may limit potential yield improvements in the near term.
Q & A Highlights
Q: With relation to the expectation for dividends to be in line with NII plus realized gains, do you expect to grow NII over time or potentially reset the dividend level? A: Robert Ladd, CEO: Although we'd like to grow the NII per share, we think we're probably at a level that we'll be at for a while. Our expectation is that the dividend will be coming down associated with that.
Q: Regarding share repurchases, why were no shares repurchased in the first quarter? A: Robert Ladd, CEO: We did not repurchase any shares after the previous quarter end due to limited periods available for repurchasing. We will have a much longer window this quarter, and it was strictly tied to timing.
Q: Can you talk about the pipeline and spreads in the pipeline today relative to 90 days ago? A: Robert Ladd, CEO: We are seeing steadiness in spreads, approximately a 5% spread over SOFR. The spreads have stabilized but not widened meaningfully yet.
Q: Does the SBA restrict your regulatory leverage ratios? A: W. Todd Huskinson, CFO: No, SBA leverage is excluded from regulatory leverage. Our regulatory leverage is around one times, and it's two times with the SBA debentures.
Q: Have you experienced any unrealized depreciation on software positions? A: W. Todd Huskinson, CFO: We have not. Those positions are marked approximately where they were at last quarter end and are performing well.
Q: Can you provide details on the $0.22 in NAV attrition, primarily markdowns in debt investments? A: Robert Ladd, CEO: Most of the markdowns were on two specific positions, with some spread markdowns in the models. The majority was from two equity positions and some debt positions.
Q: What is the timeline for reducing non-accrual loans? A: Robert Ladd, CEO: We expect progress toward the end of this year and into the next. These are generally resolved over 12 to 24 months.
Q: What has driven the recent increase in non-accruals? A: Robert Ladd, CEO: The increase is company-specific, not driven by macro trends. Private equity sponsors typically support these companies, but some have reached a point where they cannot support them anymore.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
