Exploring a Hidden Gem: High-Yield Dividend Tech Stock Insights
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Chapter 1: Introduction to High-Yield Dividend Stocks
This article delves into a lesser-known yet high-yield dividend stock that has ties to some of the most exciting names in technology. Unlike typical funds or well-recognized semiconductor companies, the spotlight here is on SuRo Capital.
SuRo Capital operates as a business development firm, engaging in investments similar to those of a venture capital fund. Notably, this company holds significant stakes in some of the most prominent tech startups.
Here's a visual from SuRo Capital's investor presentation:
SuRo Capital has investments in trendy firms such as Palantir, Nextdoor, and Coursera. Moreover, it has made late-stage investments in giants like Facebook, Lyft, Spotify, and Twitter, among others.
Section 1.1: The Uniqueness of SuRo Capital
Most tech companies refrain from offering dividends. If you were to invest directly in Palantir, you would depend solely on capital appreciation. The same applies to Lyft, Facebook, and many other emerging tech firms.
However, SuRo Capital stands apart as it provides substantial dividends, alongside special payouts.
I recently came across SuRo Capital through an article by Chris DeMuth Jr., titled "2022’s Extraordinary Dividend Bets." In his piece, he reflects on his experience holding SuRo over the past year and its performance.
According to DeMuth, SuRo (SSSS) has seen its share price increase by approximately 3% this year. While this is only marginally better than the typical yield on savings accounts, it lags behind the S&P 500's price gains. However, this statistic doesn't tell the complete story.
DeMuth notes that SuRo has been consistently distributing dividends to its shareholders throughout the year. If they didn’t require the funds, they returned them. Since his recommendation, the company declared dividends of $0.25 in January, another $0.25 in March, $2.50 in May, $2.25 in August, $2.00 in November, and $0.75 in December. This resulted in a return of over 60% of the invested capital while maintaining a stable stock price. That's the essence of investing.
In essence, SuRo generates substantial cash flow by investing in promising pre-IPO businesses.
Subsection 1.1.1: Understanding SuRo's Revenue Model
In its investor presentation, SuRo outlines its investment strategy and returns. The core of their model involves acquiring shares in pre-IPO companies and selling them once they go public.
For instance, SuRo's investment in Course Hero was made for $5 million, which has appreciated to $31.8 million. Similarly, their investment of $15.1 million in Palantir has grown to $46.7 million. After Palantir's public listing, SuRo sold over 1.5 million shares to realize profits, continuing to sell more as SEC lock-up restrictions expired.
SuRo then redistributes a significant portion of its profits to shareholders via regular and special dividends. Currently priced around $12.62, the stock issued approximately $6 in dividends last year. As DeMuth highlighted, shareholders enjoyed a 60% return on capital through dividends in 2021. If the company maintains its robust investment and stock sale performance, shareholders could anticipate another lucrative year.
Chapter 2: Investment Considerations and Conclusion
I am personally hesitant to invest in SuRo Capital, primarily because I have several other promising companies on my radar. Nevertheless, SuRo presents an intriguing tech investment opportunity and serves as an appealing high-yield alternative to crypto DeFi staking projects. Furthermore, it provides exposure to some of the hottest stocks, such as Palantir and Coursera, while they remain in their pre-IPO stages.
The first video titled Don't Know About Palantir Yet? A No-Hype No-Nonsense Review (PLTR Stock) offers insights into Palantir's business model and investment potential, providing viewers with a clear understanding of why it's a noteworthy stock.
The second video titled All In On PLTR Until Adding This Stock | The Hayley Eich Podcast With Arny discusses strategic investment decisions and the importance of diversifying one's portfolio while focusing on high-potential stocks like Palantir.
Disclaimer: This article is intended for entertainment purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.