Saratoga Investment kept its Q2 dividend at $0.75. The company flagged credit risks at Exigo and Pepper Palace that drove a NAV decline and tightened dividend coverage. The $197M capacity offers some buffer.
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Saratoga Investment Corp (SAR) declared a $0.75 per share dividend for the second quarter of fiscal 2027, matching the prior quarter's payout. The company also said it has roughly $197 million of available investment capacity, including undrawn commitments and cash.
The dividend announcement came alongside the company's fiscal first-quarter results. Adjusted net investment income fell from the prior quarter, and net asset value per share declined. Management attributed the NAV drop to mark-to-market losses on two portfolio holdings: Exigo and Pepper Palace. Those two companies are the primary credit risks in the portfolio, the company said during the earnings call.
The dividend coverage ratio tightened in Q1, meaning net investment income covered the payout less comfortably than before. The previous quarter's dividend was not fully covered by earnings, a trend that is now being watched closely. If the credit losses at Exigo or Pepper Palace widen, NII could fall further, putting pressure on the $0.75 rate. Management did not give explicit guidance on future dividends, saying the board evaluates each quarter based on earnings and portfolio performance.
Saratoga's $197 million of investment capacity gives it room to deploy capital into new deals or support existing portfolio companies. The company said it is working with Exigo and Pepper Palace on operational improvements and has no plans to write down the investments further. The broader portfolio, weighted toward senior secured loans, showed stable performance outside those two names.
The next catalyst for the dividend is the fiscal second-quarter earnings report, expected in late September. At that point, the board will set the third-quarter dividend. The third-quarter dividend decision will depend on the trajectory of NII and the mark-to-market on the two stressed holdings. Saratoga's next earnings call is scheduled for late September.
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