Hercules Capital

HTGC

Market cap $3.42B

In the closing of the recent trading day, Hercules Capital (HTGC) stood at $18.84, denoting a +1.67% move from the preceding trading day.

Ares Capital Corporation ARCC and Hercules Capital, Inc. HTGC are two leading Business Development Companies (BDCs) focused on income-oriented investing. Both companies primarily provide senior secured and structured debt financing to middle-market U.S. companies, generating the bulk of their revenues from interest income.

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.

Hercules Capital (HTGC) closed the most recent trading day at $18.61, moving 1.22% from the previous trading session.

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.

Last week, I read an interesting opinion piece about my favorite BDC (business development company). It proclaimed: “Hercules Capital's Growth Era is Over—Durability Remains.

The S&P 500 is on pace for another double-digit gain this year, but 2026 carries more uncertainty. Dividend stocks could be a smart way to insulate your portfolio from the volatility usually seen in high-growth opportunities.

Hercules Capital (HTGC) commands a 53% book value premium, justified by robust NII growth, low non-accruals, and consistent dividend coverage. HTGC's GAAP NII-to-distribution spread has ensured reliable base and supplemental dividends, with expectations for continued supplemental payouts in 2026. The BDC's tech-focused portfolio, 97.8% floating-rate loans, and prudent credit underwriting underpin its strong performance, but expose it to rate and PIK risks.

In the closing of the recent trading day, Hercules Capital (HTGC) stood at $18.69, denoting a +1.08% move from the preceding trading day.

Hercules Capital stands out among BDCs by dominating the venture debt niche, with superior deal flow and a lower cost of capital. HTGC's portfolio is concentrated in sectors with structural upside optionality and lower cyclicality risk, such as defence and drug discovery. The venture debt model offers downside protection through debt covenants and potential equity upside via warrants, supporting an ROE over 15%.