Trinity Capital Stock: 8.1%-Yielder With Growing Dividends
March 11, 2022
TRIN Stock Could Be Great for Dividend Investors
If you need capital to take your growth-stage business to a new level, Trinity Capital Inc (NASDAQ:TRIN) might be the company you’re looking for. Or, if you’re a dividend stock investor and want to ride a wave of success, Trinity Capital stock might be up your ally.
Trinity Capital is a business development company (BDC) that provides term loans and equipment financing to growth-stage companies. Growth-stage companies are defined as having active equity sponsors, earning annual revenues of up to $100.0 million, and no longer having early-stage development risks. (Source: “Fourth Quarter and Full Year Presentation,” Trinity Capital Inc, last accessed March 10, 2022.)
TRIN stock went public in early 2021, but the company has been around for 14 years. It has a successful track record of serving a multi-billion-dollar, under-served, niche market. So far, Trinity Capital Inc has made 221 investments totaling $1.7 billion and has made 131 exits.
The BDC’s large portfolio of partners consists of companies operating in industries including software, Internet of Things (IoT), energy and efficiency, consumer and retail, health care, clean technology, semiconductor and hardware, chemicals and fuels, and commercial services. Its portfolio currently includes Axiom Space, Inc., Impossible Foods Inc, Nexus Systems, LLC, and Suniva Inc. (Source: “Meet Our Partners,” Trinity Capital Inc, last accessed March 10, 2022.)
Trinity Capital Inc’s Recent Investment Activity
You have to spend money to make money, and Trinity Capital is good at doing that. For the fourth quarter of 2021, it reported $248.0 million in new commitments, bringing its total commitments for that year to a record $757.0 million. (Source: “Trinity Capital Inc. Reports Fourth Quarter and Full Year 2021 Financial Results,” Trinity Capital Inc, March 3, 2022.)
In late February 2022, the BDC provided Cepton Technologies, Inc. with a $25.0-million credit facility. The transaction was completed before the company merged with Growth Capital Acquisition Corp to form Cepton Inc. (NASDAQ:CPTN). (Source: “Trinity Capital Inc. Provides $25 Million Growth Capital to Cepton Technologies, Inc.” Trinity Capital Inc, February 28, 2022.)
Cepton Inc. provides light detection and ranging (lidar)-based software for automotive, smart city, smart space, and smart industrial applications in the U.S. and around the world. Cepton is expected to use the loan from Trinity Capital to scale its operations to meet growing demand.
On the selling side, Trinity Capital has announced that it will receive approximately $59.8 million in net proceeds from the sale of its equity investments in Lucid Group Inc (NASDAQ:LCID) and Matterport Inc (NASDAQ:MTTR). (Source: “Trinity Capital Inc. to Receive $59.8 Million in Net Proceeds From the Sale of Certain Equity Investments,” Trinity Capital Inc, February 2, 2022.)
Trinity Capital initially invested in both of the companies at a total cost of approximately $9.0 million. After having liquidated its position in both companies, Trinity Capital expects to realize a 464% gain of $50.8 million.
The net gains from the sale represent capital gains of $1.86 per share, which will help Trinity Capital stock deliver significant shareholder value. The company’s board is evaluating its dividend plan for 2022 and beyond to ensure its investment returns are properly distributed to its shareholders and support the company’s long-term growth strategy.
Fourth-Quarter & Full-Year 2021 Results
For the fourth quarter ended December 31, 2021, Trinity Capital announced that its total investment income increased by 53.9% year-over-year to $23.6 million. Its net investment income more than doubled in the quarter to $10.6 million, or $0.39 per share. (Source: Trinity Capital Inc, March 3, 2022, op. cit.)
The company’s full-year 2021 investment income advanced 49.5% year-over-year to $82.2 million. Its net investment income in the full year rallied by 67% to $39.0 million, or $1.50 per share. The company’s full-year net investment portfolio growth was $379.8 million, representing a 76.9% increase year-over-year. Trinity Capital Inc’s full-year net asset value increased by 25.9% year-over-year from $13.03 to $16.40 per share.
“After our Nasdaq listing at the beginning of the year, we have delivered on our promises, achieved consecutive net portfolio growth and generated a record $757.0 million of total new commitments,” said Steven Brown, Trinity Capital Inc’s chairman and CEO. “In 2022, we expect to continue this momentum with strategic decisions aimed at achieving our primary objective of maximizing shareholder return.” (Source: Ibid.)
Trinity Capital Inc Has Raised Dividend Every Quarter Since Inception
Trinity Capital’s strong year helped TRIN stock reward investors with growing dividends. In the first quarter of 2021, Trinity Capital stock paid out $0.28 per unit. That jumped to $0.29 in the second quarter, $0.33 in the third quarter, and $0.36 in the fourth quarter.
TRIN stock’s growing dividend is more than safe. Trinity Capital Inc’s payout ratio is just 36.5%. Moreover, the company’s fourth-quarter net investment income of $0.39 per share easily covered its $0.36 quarterly dividend.
This bodes well for the possibility of additional dividend increases in 2022, especially in light of Trinity Capital Inc’s recent exits from Lucid Group Inc and Matterport Inc.
Trinity Capital stock has rewarded buy-and-hold investors, too. In spite of economic headwinds, soaring inflation, rising interest rates, and the war in Ukraine, TRIN stock is up by:
- 10% over three months
- 15% over the last six months
- 25% year-over-year
While Trinity Capital stock is only up by 1.5% in 2022 as of this writing, that’s far better than the Nasdaq, which is down by 15.4%; the S&P 500, which is down by 10.2%; and the Dow Jones Industrial Average, which is down by 8.0%.
Chart courtesy of StockCharts.com
Wall Street analysts’ outlook for TRIN stock is solid, with an average 12-month share-price target of $20.13 and a high estimate of $21.00. That represents potential gains of 13.7% and 18.6%, respectively.
Wall Street analysts tend to be quite conservative, though. A 12-month target of $24.50 is certainly within reach. That would represent a gain of 38.5% from the current level, approximately 50% from when I last wrote about Trinity Capital Inc in December 2021, and 235% from when I profiled the company in April 2021.
The Lowdown on Trinity Capital Stock
In the words of Trinity Capital Inc’s CEO, the company “had a banner year in 2021.” And that momentum is expected to continue in 2022. The company continues to succeed on all fronts, with record deployments, rising quarterly dividends, and a rising share price.
What more can an investor ask for from an ultra-high-yield stock?
