Hercules Capital

HTGC

Market cap $3.27B

Hercules Capital delivered record investment fundings so far in 2025 as well as record Q3 net investment income while maintaining strong dividend coverage. The BDC's robust origination trajectory and excess dividend coverage suggest likely supplemental dividend announcements in early 2026, which is set to benefit income-focused investors. Despite a rise in non-accruals in Q3 '25, Hercules Capital's dividend coverage ratio and consistent NII performance support a higher-than-average P/NAV ratio.

I highlight three undervalued high-yield stocks: Lineage, Conagra Brands, and Hercules Capital, each facing unique headwinds. LINE offers a 6.2% yield, trades below asset replacement cost, and leads cold storage, but faces short-term oversupply and demand challenges. CAG yields 7.9%, is executing a turnaround with supply chain improvements and divestitures, and trades at a deep discount to historical valuation.

There is a major market disconnect in which there are blue-chip dividend payers offering 11%+ yields right now, despite posting strong fundamentals. I discuss why the market is bearish on these stocks and why I think the fears are overblown. I also share two high-yield stocks that I think are attractive buys at current pricing.

Hercules Capital and Trinity Capital are best positioned among BDCs to sustain base dividends amid possible lower interest rates. Both HTGC and TRIN benefit from strong fundamentals, investment-grade credit ratings, robust liquidity, and internally managed structures, supporting dividend stability. Contractual interest rate floors and NAV premiums provide HTGC and TRIN with defensive advantages over peers facing greater earnings declines from rate cuts.

Hercules Capital offers a compelling mix of high yield, strong credit quality, and steady growth, making it attractive for income investors. HTGC demonstrated strong results, including record new commitments and low non-accruals, highlighting disciplined management and portfolio strength. Despite trading at a premium to NAV, HTGC's forward P/E of 9.1 and fully covered 10.7% dividend yield underscore its earnings power and shareholder alignment.

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.

Ares Capital, Hercules Capital and Runway Growth Finance have been highlighted in this Industry Outlook article.

Hercules Capital (HTGC) is upgraded to a buy as its price approaches the five-year price-to-NAV average, offering attractive entry for long-term investors. HTGC maintains strong fundamentals with robust dividend coverage (8.8% yield), increasing NAV per share, and continued investment in new growth opportunities. Despite sector headwinds and a recent share price decline, HTGC's portfolio remains diversified, with manageable non-accruals and efficient capital deployment.

SAN MATEO, Calif.--(BUSINESS WIRE)--Hercules Capital, Inc. (NYSE: HTGC) (“Hercules,” “Hercules Capital,” or the “Company”), the largest and leading specialty financing provider to innovative venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms, today announced that members of the executive management team will be participating at the following event for the financial community: The Citizens Financial Services.

Ares Capital, Hercules and Runway Growth Finance have been highlighted in this Industry Outlook article.