Fidus Investment

FDUS

Market cap $716M

BDC earnings are sensitive to interest rates. As there is no meaningful margin of safety in the BDC system, forthcoming interest rate cuts might trigger a wave of dividend cuts. For prudent passive income investors who want to avoid experiencing stress that is associated with dividend reductions, BDCs might not seem like a good option.

The Fed's dovishness has been the key driver for the BDC sell-off. The idea is that lower interest rates should lead to lower dividends (i.e., BDCs cutting their dividend across the board). While it is a process that takes time, the current data show that many BDCs are well-positioned to safeguard their existing dividends.

BDCs have had a rough year so far. Yet, Q3 earnings data points indicate that the tide could be turning. While there are some tangible improvements in BDC business environment, many risks remain open.

FDUS's focus on lower middle market lending, low leverage, and strong equity stakes have driven stability in dividend coverage and NAV yet again. Given that the transaction markets are opening up, FDUS's value proposition has become even more interesting. However, when FDUS announced Q3 results, the market immediately penalized the stock by sending it lower by ~5%.

Fidus Investment remains a Buy due to strong dividend coverage, resilient earnings, and effective portfolio management despite a challenging interest rate environment. FDUS offers a 10.8% dividend yield with a 116% coverage rate, supported by significant spillover income, ensuring payout stability and potential for supplemental distributions. The portfolio continues to grow through new investments, low non-accrual rates, and realized gains, positioning FDUS as one of the more resilient BDCs.

Fidus Investment ( FDUS ) Q3 2025 Earnings Call November 7, 2025 9:00 AM EST Company Participants Jody Burfening - Investor Relations Contact Edward Ross - Chairman of the Board & CEO Shelby Sherard - CFO, Chief Compliance Officer & Corporate Secretary Conference Call Participants Robert Dodd - Raymond James & Associates, Inc., Research Division Mickey Schleien - Clear Street LLC Presentation Operator Good day, and welcome to the Fidus Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

Fidus Investment (FDUS) came out with quarterly earnings of $0.5 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.61 per share a year ago.

There is a theory that says investors have to allocate capital towards the highest risk-adjusted return opportunities (e.g., where the Sharpe ratio is the highest). The return is defined as expected price gain and received income, while the risk is defined as expected share price volatility. Yet, as an income investor, I approach these variables differently. Return is defined as expected income, and risk is defined as the probability of income cut.

Fidus Investment (FDUS) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Many investors have become fearful of BDCs. The sector wide 22% discount to NAV is proof of that. Yet, very recently I have been adding more to my positions.