Liberty All-Star Equity Fund (NYSE: USA) and Capitala Finance Corp. (NASDAQ:CPTA) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Insider & Institutional Ownership

28.2% of Liberty All-Star Equity Fund shares are held by institutional investors. Comparatively, 28.5% of Capitala Finance Corp. shares are held by institutional investors. 0.1% of Liberty All-Star Equity Fund shares are held by company insiders. Comparatively, 8.4% of Capitala Finance Corp. shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.1%. Capitala Finance Corp. pays an annual dividend of $1.00 per share and has a dividend yield of 12.4%. Capitala Finance Corp. pays out 294.1% 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 Liberty All-Star Equity Fund and Capitala Finance Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Liberty All-Star Equity Fund N/A N/A N/A
Capitala Finance Corp. 8.91% 8.55% 3.66%

Volatility & Risk

Liberty All-Star Equity Fund has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500. Comparatively, Capitala Finance Corp. has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Liberty All-Star Equity Fund and Capitala Finance Corp., as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Liberty All-Star Equity Fund 0 0 0 0 N/A
Capitala Finance Corp. 0 4 3 0 2.43

Capitala Finance Corp. has a consensus target price of $14.92, indicating a potential upside of 84.61%. Given Capitala Finance Corp.’s higher possible upside, analysts plainly believe Capitala Finance Corp. is more favorable than Liberty All-Star Equity Fund.

Valuation and Earnings

This table compares Liberty All-Star Equity Fund and Capitala Finance Corp.’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Liberty All-Star Equity Fund N/A N/A N/A N/A N/A
Capitala Finance Corp. $68.31 million 1.88 $9.15 million $0.34 23.76

Capitala Finance Corp. has higher revenue and earnings than Liberty All-Star Equity Fund.

Summary

Capitala Finance Corp. beats Liberty All-Star Equity Fund on 9 of the 11 factors compared between the two stocks.

Liberty All-Star Equity Fund Company Profile

Liberty All-Star Equity Fund is a diversified, closed-end management investment fund. The Fund seeks total investment return comprising long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities. It allocates its portfolio assets on an approximately equal basis among several independent investment management organizations having various investment styles recommended and monitored by its investment advisor. It invests at least 80% of its net assets in a diversified portfolio of equity securities. The Fund invests in various sectors, including financials, information technology, healthcare, consumer discretionary, consumer staples, industrials, energy, materials, real estate, utilities and telecommunication services. Its investment managers invest primarily for pension funds, endowments, foundations and other institutions. The Fund’s investment advisor is ALPS Advisors, Inc.

Capitala Finance Corp. Company Profile

Capitala Finance Corp. is an externally managed non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.

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