Capital Southwest

CSWC

Market cap $1.36B

DALLAS, Jan. 15, 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 third quarter of its 2026 fiscal year (quarter ended December 31, 2025) and its third quarter 2026 earnings release and conference call schedule. Capital Southwest's preliminary estimate of its third quarter 2026 pre-tax net investment income is in the range of $0.59 to $0.60 per share.

Don't just buy what captures your attention; buy what fits your cash flow plan. Growth vs. Value: While Growth stocks rely on selling for a profit, Value stocks (trading at 11x P/E) allow you to sit back and collect high dividends without ever needing to sell. A balanced income plan relies on three pillars: Fixed-Income for stability, Funds (CEFs/ETFs) for diversification, and Individual Stocks for high-reward cash flow.

Capital Southwest: Too Good To Sell, Too Expensive To Buy

Capital Southwest stands out among BDCs for its remarkably stable book value, with less than a 0.5% decline over the past year. CSWC offers an attractive 11% dividend yield, underpinned by a low 1.0% non-accrual rate and 99% allocation to senior secured debt. Recent results show 4% sequential growth in pre-tax net investment income and a slight increase in book value per share.

Capital Southwest remains a buy, offering mid-single digit total return prospects as rates normalize and income expectations reset. CSWC's 96.6% floating-rate portfolio and conservative leverage posture provide resilience, but NII and dividend growth are moderating from peak levels. Operating leverage improvements and strong credit quality support downside protection, with non-accruals at ~1% and 91% of investments rated top tier.

Capital Southwest has the right tools to weather pressures from lower interest rates and create value in the long run, across different cycles. The secret sauce is really the embedded trifecta of internal management, high-quality equity bias, and conservative capital structure. The premium over NAV for CSWC might limit alpha-like performance in case of a sector-wide optimism, and the current supplemental distributions might be cut, leaving only the base dividend in place.

BDC sector valuations remain depressed, with P/NAV metrics under 1x due to falling rates and credit risk concerns. Dividend sustainability is diverging across BDCs; not all will cut, but the ones with sustainable dividends do not automatically have strong total return prospects. I highlight one BDC as a compelling bargain with strong total return prospects and contrast it with another viewed as highly overpriced.

I trimmed positions in NVDA and AMD due to valuation concerns and overexposure, favoring BDCs like ARCC, OBDC, and HTGC for yield. November dividend income reached a record $653, up 5% Y/Y, with BDCs now comprising 33% of total dividends despite potential sector-wide dividend cuts. My 2025 target is $11,000 in annual net dividends (8% growth), with flexibility to raise capital for real estate or travel if opportunities arise.

Investors have started to question how sustainable BDC dividends are. A lot of this skepticism is logical and justified by valid reasons. My calculus shows that on average BDCs could cut their dividends by 20% in order to avoid NAV erosion.

Most retirees focus on the wrong metric - and it could cost them everything. This income framework turns volatility into an advantage. A single portfolio shift could dramatically reduce retirement stress.