Crescent Capital (CCAP): A High-Conviction Income Play with a 11% Dividend Yield and 22% NAV Discount

In today's risk-averse market environment, income-focused investors are increasingly prioritizing assets that combine high yields with robust downside protection. Crescent Capital BDC (NASDAQ: CCAP) emerges as a compelling candidate, offering a 11.7% dividend yield and a 23.9% discount to net asset value (NAV) that together create a high-conviction income play with a strong margin of safety. For investors seeking to balance yield with capital preservation, CCAP's unique positioning in the business development company (BDC) sector warrants closer scrutiny.

The Attraction of a 11.7% Dividend Yield

Crescent Capital's dividend yield, currently at 11.7%, dwarfs the Financial Services sector average of 2.87%. This premium is underpinned by the company's disciplined capital structure and consistent earnings power. Over the past year, CCAP has maintained a regular quarterly dividend of $0.42 per share, supplemented by special dividends such as the $0.05 payout in June 2025. These distributions have driven a trailing twelve-month (TTM) yield of 13.76%, reflecting the company's ability to generate covered payouts.

The sustainability of this yield is further reinforced by a dividend cover ratio of 2.0, meaning earnings comfortably exceed dividend obligations. This buffer is critical in a low-growth environment, where companies with weak earnings coverage often face dividend cuts. CCAP's 37 consecutive quarters of covering its regular dividend, coupled with a stable net investment income of $0.46 per share, suggest the yield is unlikely to erode in the near term.

A 23.9% NAV Discount: A Margin of Safety

While the dividend yield is enticing, CCAP's 23.9% discount to NAV—trading at $14.88 per share versus a Q2 2025 NAV of $19.55—adds a layer of capital preservation. This discount, one of the largest in the BDC sector, reflects market skepticism rather than operational weakness. Management attributes the gap to macroeconomic volatility and sector-specific headwinds, not to deteriorating portfolio performance.

The company's NAV has remained resilient despite a $0.07 quarterly decline, driven by special dividend distributions and modest unrealized losses. Notably, CCAP's long-term NAV growth of 0.6% since its 2020 IPO contrasts sharply with the 10.5% average decline for public BDCs. This outperformance underscores the company's disciplined credit underwriting and diversified portfolio, which includes a 10.4% weighted average yield on income-producing securities.

To address the discount, the board authorized a $20 million share repurchase program, enabling CCAP to buy back shares at prices below NAV. This initiative not only enhances shareholder value but also acts as a tailwind for the stock price, particularly if the discount persists.

Strategic Positioning in a Risk-Averse Market

CCAP's dual advantages—high yield and NAV discount—align with the priorities of risk-averse investors. The company's debt-to-equity ratio of 1.23x, within its target range of 1.1x to 1.3x, and a weighted average cost of debt of 6.09% further highlight its prudent capital management. These metrics suggest CCAP is well-positioned to navigate interest rate fluctuations and economic uncertainty without compromising its dividend or portfolio stability.

Moreover, the BDC sector's historical underperformance—exacerbated by regulatory pressures and market sentiment—creates an opportunity for CCAP to outperform. Its focus on senior secured loans and private equity partnerships, combined with a 110% dividend coverage ratio, positions it to deliver consistent returns even in a low-growth environment.

Investment Thesis and Risks

For investors seeking a high-conviction income play, CCAP offers a rare combination of yield and capital protection. The 11.7% dividend yield provides immediate income, while the 23.9% NAV discount offers potential for capital appreciation as the market corrects its undervaluation. The share repurchase program adds an additional catalyst, particularly if the discount widens further.

However, risks remain. The BDC sector is sensitive to interest rate changes and credit cycles, and CCAP's portfolio includes non-accrual loans due to borrower-specific challenges. Additionally, the company's reliance on special dividends—while boosting short-term yields—could introduce volatility if taxable income fluctuates.

Conclusion: A Compelling Case for Income Investors

Crescent Capital BDC stands out as a high-conviction income play in a market starved of yield. Its 11.7% dividend yield, supported by a 2.0 earnings cover ratio, and a 23.9% NAV discount, backed by a $20 million repurchase program, create a compelling risk-reward profile. For investors prioritizing both income and capital preservation, CCAP offers a rare opportunity to leverage its structural advantages in a risk-averse environment.

Investment Advice: Consider allocating a portion of income-focused portfolios to CCAP, particularly for investors with a medium-term horizon and a tolerance for BDC sector volatility. Monitor the company's quarterly NAV trends and share repurchase activity for signs of narrowing the discount.