Buy Recommendation: Medley Capital Corp
Today I am recommending a buy trade in Medley Capital Corp (NYSE:MCC). This is a shorter term swing trade to take advantage of the potential share price run up to the next ex-dividend date.
I have not found an attractive ex-dividend to ex-dividend trade set up in quite a while. This strategy takes advantage of the market inclination to bid up the share prices of high yield stocks as an ex-dividend date approaches. Investors like earning those big dividends and the result is a natural swing of share price declines after a stock goes ex-dividend and then a recovery as the next ex-dividend date approaches.
MCC is a business development company (BDC) whose business is, quite frankly, a mess. The stock is trading at 30% below book value and yields almost 19%. The management team is taking steps such as reducing their fees and buying back shares that should help support the dividend, but I would not consider this stock as a longer term investment. That said, the ex-dividend to ex-dividend swing pricing has set up a repeating cycle for the last several quarters, so I see a good opportunity for a nice gain in the next six to seven weeks.
Recommendation: Buy MCC at no more than $6.27 per share.
Target price is $6.70 for a quick 6.8% gain. Shares of MCC will be sold no later than the day before the next ex-dividend date, which should occur on or about August 15.