Capital Southwest

CSWC

Market cap $1.5B

DALLAS, July 16, 2026 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (“Capital Southwest”) (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, is pleased to announce its preliminary operating results for the first quarter of its 2027 fiscal year (quarter ended June 30, 2026) and its first quarter 2027 earnings release and conference call schedule.

Main Street Capital (MAIN) and Capital Southwest (CSWC) are among the most elite BDCs. I compare them side-by-side to share which one I think is a better buy today. I also look at the main risks for each business.

The BDC sector trades at a deep 0.71x P/NAV, reflecting bearish sentiment despite stable credit fundamentals. The market is focused on a credit risk (or rising non-accruals). In my view, the bigger risk lies in the income side.

Two of the most defensively positioned, highest-yielding opportunities in years are hiding in plain sight. One combines a 7%+ yield with strong long-term growth potential and is backed by powerful macro tailwinds. The other yields 12%, trades at a deep discount, has a solid business model and balance sheet, and is buying back stock aggressively.

CSWC remains a high-quality BDC with strong first-lien debt focus and well-diversified portfolio across 131 companies. I maintain a hold rating on CSWC due to its 39% premium to book value and recent yield compression from 11.3% to 10.8%. Dividend coverage is tightening, with Q4 NII of $0.57 per share falling short of the $0.64 total dividend, contributing to a NAV decline.

Sustainable high yields are the holy grail of early retirement on dividends. I detail some blue-chip 8-10% yields that appear to be sustainable and even likely to grow moving forward. I also detail some of the risks to keep in mind.

According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate.

The longer this bull run lasts, the greater the likelihood of a near-term correction. A market correction would be healthy, realigning asset prices with fundamentals and creating opportunities for patient investors. So, rather than full derisking, I advocate a 'balanced hedge' approach.

It is a good time to reduce risk. High-yielding securities could be the first in line for elimination. However, some high-yielding picks are just built differently.

Higher interest rates are generally favorable for BDCs. However, some BDCs can suffer from higher rates that could potentially result in painful dividend cuts. In this article, I explain how we as BDC investors could digest the current rate regime and its implications on dividends.