Analyzing BlackRock TCP Capital (TCPC) and Donegal Group Inc. Class A (DGICA)

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BlackRock TCP Capital (NASDAQ: DGICA) and Donegal Group Inc. Class A (NASDAQ:DGICA) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, profitability, risk, analyst recommendations and dividends.

Dividends

BlackRock TCP Capital pays an annual dividend of $1.44 per share and has a dividend yield of 9.8%. Donegal Group Inc. Class A pays an annual dividend of $0.57 per share and has a dividend yield of 4.0%. BlackRock TCP Capital pays out 72.4% of its earnings in the form of a dividend. Donegal Group Inc. Class A pays out 190.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Donegal Group Inc. Class A has increased its dividend for 2 consecutive years. BlackRock TCP Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares BlackRock TCP Capital and Donegal Group Inc. Class A’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
BlackRock TCP Capital $175.97 million N/A $90.61 million $1.99 7.36
Donegal Group Inc. Class A $739.03 million 0.55 $7.11 million $0.30 48.10

BlackRock TCP Capital has higher earnings, but lower revenue than Donegal Group Inc. Class A. BlackRock TCP Capital is trading at a lower price-to-earnings ratio than Donegal Group Inc. Class A, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

BlackRock TCP Capital has a beta of 0.79, suggesting that its share price is 21% less volatile than the S&P 500. Comparatively, Donegal Group Inc. Class A has a beta of 0.48, suggesting that its share price is 52% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for BlackRock TCP Capital and Donegal Group Inc. Class A, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BlackRock TCP Capital 0 0 5 0 3.00
Donegal Group Inc. Class A 0 1 1 0 2.50

BlackRock TCP Capital currently has a consensus target price of $17.30, suggesting a potential upside of 18.17%. Donegal Group Inc. Class A has a consensus target price of $18.50, suggesting a potential upside of 28.21%. Given Donegal Group Inc. Class A’s higher possible upside, analysts plainly believe Donegal Group Inc. Class A is more favorable than BlackRock TCP Capital.

Profitability

This table compares BlackRock TCP Capital and Donegal Group Inc. Class A’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BlackRock TCP Capital 32.55% 11.22% 5.90%
Donegal Group Inc. Class A -1.92% -2.36% -0.58%

Insider and Institutional Ownership

51.7% of BlackRock TCP Capital shares are held by institutional investors. Comparatively, 30.9% of Donegal Group Inc. Class A shares are held by institutional investors. 0.6% of BlackRock TCP Capital shares are held by insiders. Comparatively, 13.1% of Donegal Group Inc. Class A shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

BlackRock TCP Capital beats Donegal Group Inc. Class A on 11 of the 16 factors compared between the two stocks.

About BlackRock TCP Capital

TCP Capital Corp. is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. It invests in the debt of middle-market companies, as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Its investments may include an equity component and may make equity investments directly. It intends to focus on privately negotiated investments in debt of middle-market companies. It may make investments of all kinds and at all levels of the capital structure, including in equity interests, such as preferred or common stock and warrants or options received in connection with its debt investments. As of December 31, 2016, its investment portfolio consisted of 90 portfolio companies. Tennenbaum Capital Partners, LLC is the investment manager and advisor of the Company.

About Donegal Group Inc. Class A

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. It operates through four segments: Investment Function, Personal Lines of Insurance, Commercial Lines of Insurance, and Investment in DFSC. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles. It also offers homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft; and liability of the insured arising from injury to other persons or their property. In addition, the company offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against various perils, primarily combining liability and physical damage coverages; and workers' compensation policies, which provide benefits to employees for injuries sustained during employment. Donegal Group Inc., through its interest in Donegal Financial Services Corporation, operates a savings bank. The company markets its insurance products through a network of approximately 2,400 independent insurance agencies. Donegal Group Inc. was founded in 1986 and is headquartered in Marietta, Pennsylvania. Donegal Group Inc. is a subsidiary of Donegal Mutual Insurance Company.

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