Triangle Capital lowers its dividend for first time

Raleigh investment firm Triangle Capital posted a 46 percent decline in net investment income in the first quarter and lowered its quarterly dividend for the first time ever.

The company announced after the markets closed Wednesday that its net investment income totaled $9.6 million, or 29 cents per share, down from $17.8 million a year ago.

A $1.8 million reduction in non-recurring fee income and a $2.9 million decrease in non-recurring dividend income stemming from its investments contributed to the decline.

In addition, net investment income would have been 16 cents per share higher if not for expenses related to the previously announced retirement of CEO Garland S. Tucker III. That included a $2.5 million cash bonus approved by the board of directors as well as accelerated vesting of 47,000 shares of restricted stock previously awarded to him, according to documents filed with the Securities and Exchange Commission.

Tucker, 68, the company’s co-founder who spearheaded the buildup of the company’s $940 million investment portfolio, retired in February but remains as chairman and also serves as a $350,000-a-year senior advisor to the company. Tucker was succeeded as CEO by Ashton Poole, who previously was president and chief operating officer.

Triangle Capital has issued a dividend each quarter since it went public in 2007, and this is the first time that the company has reduced its dividend. The quarterly dividend was lowered to 45 cents, down from 54 cents the prior quarter.

In a statement, Poole said the lower dividend was the result of of “market pricing” – that is, the interest rates Triangle Capital charges on loans – dropping from the 14 percent to 15 percent range in 2013 to 11 percent to 13 percent today.

Lowering the dividend will enable the company to “continue to operate from a position of strength as we grow our investment portfolio,” Poole added.

The company’s chief financial officer, Steven Lilly, said in an interview: “We always want the cash flow our business generates to be in excess of our dividend obligation to shareholders.”

Triangle Capital also touted that, since its IPO, its dividends have been 58 percent higher than its publicly traded peers.

As a federally regulated business development company, or BDC, Triangle Capital is required to distribute at least 90 percent of its taxable income to shareholders – making it a dividend play for investors.

Triangle Capital makes loans to privately held businesses with positive cash flow and annual revenue ranging from $20 million to $200 million. It also takes a minority ownership stake in its portfolio companies.

Earlier Wednesday, Triangle Capital shares closed at $19.99, up 26 cents. Its shares have risen 5 percent this year.

David Ranii: 919-829-4877, @dranii