SAR

Saratoga is a business-development company (BDC) that lends to lower-middle-market software and services firms and holds a leveraged equity stake in Saratoga CLO. On the surface it screens cheap: 9.7x FY2026 diluted EPS of $2.31, net income up 30.3% to $36.6M, and — with $396M of equity against 16.3M shares — a book value near $24.3/share, so the $22.36 price is roughly 0.92x NAV. The credit facilities show asset coverage per unit of ~$1,684 (≈168%), comfortably above the 150% BDC floor, and the company retired a stack of 2025-maturity notes, terming out much of its debt into 2027 paper. For an income buyer this is a ~14% headline yield (dividends paid $52.4M / 16.3M shares ≈ $3.21) at a discount to book — the classic reason to own the name.

But the quality of that yield is the whole question, and the numbers say caution. Dividends paid ($52.4M, +28.5%) exceeded GAAP net income ($36.6M) by ~$16M, retained earnings swung to a -$43.1M deficit (worse by 112.5%), and cash collapsed 98.9% to $1.68M while operating cash flow ran -$88.0M as the portfolio was funded. Share count rose 5.9%, consistent with ATM issuance to plug that funding gap — dilutive at a discount to NAV. Net income has also been erratic ($45.7M → $24.7M → $8.93M → $28.1M → $36.6M), typical of BDC mark volatility, so the 'growth' is a rebound, not a trend.