Head-To-Head Comparison: Kayne Anderson Energy Development (KED) vs. Hercules Capital (HTGC)

Kayne Anderson Energy Development (NYSE: KED) and Hercules Capital (NYSE:HTGC) are both small-cap financials companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, earnings, risk, analyst recommendations, valuation and institutional ownership.

Dividends

Kayne Anderson Energy Development pays an annual dividend of $1.60 per share and has a dividend yield of 8.8%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.5%. Kayne Anderson Energy Development pays out -2,285.7% of its earnings in the form of a dividend. Hercules Capital pays out 136.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Kayne Anderson Energy Development and Hercules Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kayne Anderson Energy Development -2,475.00% -13.79% -8.15%
Hercules Capital 39.73% 12.93% 6.75%

Institutional & Insider Ownership

38.8% of Hercules Capital shares are owned by institutional investors. 3.2% of Hercules Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Kayne Anderson Energy Development and Hercules Capital’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kayne Anderson Energy Development N/A N/A N/A ($0.07) -260.00
Hercules Capital $175.05 million 6.25 $68.70 million $0.91 14.29

Hercules Capital has higher revenue and earnings than Kayne Anderson Energy Development. Kayne Anderson Energy Development is trading at a lower price-to-earnings ratio than Hercules Capital, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Kayne Anderson Energy Development and Hercules Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kayne Anderson Energy Development 0 0 1 0 3.00
Hercules Capital 0 4 7 0 2.64

Kayne Anderson Energy Development currently has a consensus price target of $20.00, indicating a potential upside of 9.89%. Hercules Capital has a consensus price target of $14.33, indicating a potential upside of 10.19%. Given Hercules Capital’s higher probable upside, analysts plainly believe Hercules Capital is more favorable than Kayne Anderson Energy Development.

Risk and Volatility

Kayne Anderson Energy Development has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.87, meaning that its stock price is 13% less volatile than the S&P 500.

Summary

Hercules Capital beats Kayne Anderson Energy Development on 11 of the 14 factors compared between the two stocks.

Kayne Anderson Energy Development Company Profile

Kayne Anderson Energy Development Company is a non-diversified, closed-end fund. The Fund’s investment objective is to generate both current income and capital appreciation, through equity and debt investments. It seeks to achieve this objective by investing approximately 80% of its total assets in securities of companies that derive their revenue from activities in the energy industry, including midstream energy companies, which operates assets used to gather, transport, process, treat, terminal and store natural gas, natural gas liquids, crude oil or refined petroleum products; upstream energy companies, which are engaged in the exploration, extraction and production of natural resources, including natural gas, natural gas liquids and crude oil, from onshore and offshore geological reservoirs, and other energy companies, which are engaged in owning, leasing, managing, producing, processing and selling of coal and coal reserves. KA Fund Advisors, LLC is the advisor of the Fund.

Hercules Capital Company Profile

Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.

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