Financial Survey: Stellus Capital Investment (NYSE:SCM) & Nuveen Churchill Direct Lending (NYSE:NCDL)

Nuveen Churchill Direct Lending (NYSE:NCDL) and Stellus Capital Investment (NYSE:SCM) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, valuation, analyst recommendations, profitability, dividends, institutional ownership and risk.

Institutional and Insider Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. 0.6% of Nuveen Churchill Direct Lending shares are owned by insiders. Comparatively, 4.0% of Stellus Capital Investment shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility and Risk

Nuveen Churchill Direct Lending has a beta of 0.4, meaning that its stock price is 60% less volatile than the S&P 500. Comparatively, Stellus Capital Investment has a beta of 0.66, meaning that its stock price is 34% less volatile than the S&P 500.

Profitability

This table compares Nuveen Churchill Direct Lending and Stellus Capital Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Nuveen Churchill Direct Lending	36.83%	11.13%	4.83%
Stellus Capital Investment	29.77%	10.72%	3.95%

Earnings & Valuation

This table compares Nuveen Churchill Direct Lending and Stellus Capital Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Nuveen Churchill Direct Lending	$224.04 million	2.98	$116.32 million	$1.53	8.83
Stellus Capital Investment	$104.74 million	3.63	$45.85 million	$1.09	12.04

Nuveen Churchill Direct Lending has higher revenue and earnings than Stellus Capital Investment. Nuveen Churchill Direct Lending is trading at a lower price-to-earnings ratio than Stellus Capital Investment, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings for Nuveen Churchill Direct Lending and Stellus Capital Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Nuveen Churchill Direct Lending	1	3	1	0	2.00
Stellus Capital Investment	0	3	0	0	2.00

Nuveen Churchill Direct Lending presently has a consensus price target of $15.75, indicating a potential upside of 16.55%. Stellus Capital Investment has a consensus price target of $13.00, indicating a potential downside of 0.95%. Given Nuveen Churchill Direct Lending’s higher probable upside, equities research analysts plainly believe Nuveen Churchill Direct Lending is more favorable than Stellus Capital Investment.

Dividends

Nuveen Churchill Direct Lending pays an annual dividend of $1.80 per share and has a dividend yield of 13.3%. Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 12.2%. Nuveen Churchill Direct Lending pays out 117.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment pays out 146.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Nuveen Churchill Direct Lending is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Nuveen Churchill Direct Lending beats Stellus Capital Investment on 10 of the 15 factors compared between the two stocks.

About Nuveen Churchill Direct Lending

Nuveen Churchill Direct Lending Corp. is a specialty finance company focused primarily on investing in senior secured loans to private equity-owned U.S. middle market companies. It has elected to be regulated as a business development company. Nuveen Churchill Direct Lending Corp. is based in NEW YORK.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.