Horizon Technology Shows Promise Despite Decreasing Share Price

Photo of author
Written By Joel Gbolade

Horizon Technology Finance Corporation (NASDAQ: HRZN) is a business development company (BDC) primarily engaged in making debt investments in the technology and life sciences sectors.

Despite recent market concerns leading to a decrease in HRZN’s stock price in 2024, the BDC’s investment strategy and dividend payouts present a compelling value proposition, particularly after a significant decline in its valuation multiple from the end of 2023.

Financial Performance and Market Concerns

Horizon Technology Finance has exhibited strong financial performance, with a notable 70% year-over-year increase in net investment income, totaling $61.5 million in 2023. This increase is primarily due to the growth in the underlying loan portfolio.

Credit: DepositPhotos

However, this positive trend has been tarnished by a threefold increase in net realized losses, amounting to $29.9 million for the year, reflecting the higher risk associated with the sectors in which HRZN invests.

Dividend Sustainability and Coverage

Despite the increased investment losses, HRZN maintains a well-covered dividend bolstered by significant excess dividend coverage.

In 2023, the BDC distributed 67% of its net investment income as dividends, which is a lower payout ratio compared to some of its peers like TriplePoint Venture Growth BDC Corp. (TPVG).

This prudent management of payout ratios has enabled HRZN to pay a special dividend of $0.05 per share in the first quarter of 2024, underscoring its ability to manage excess portfolio income effectively.

Investment Strategy and Portfolio Adjustments

HRZN has continued to grow its investment portfolio, which stood at a fair value of $709.1 million as of December 31, 2023.

The first quarter of 2024 saw HRZN originating $33.5 million in new loans. However, the increase in bad loans during the same period has somewhat overshadowed this growth, leading to a sharp decline in the company’s stock price from $13.50 at the beginning of the year to just $11.25.

Despite this, the BDC’s strategic focus and the ability to secure new investments demonstrate resilience and a forward-looking approach to managing its portfolio.

Risk Assessment and Market Position

The primary risk for Horizon Technology Finance lies in the potential for increased investment losses, which could erode the margin of safety for its dividend payouts and impact the overall net asset value (NAV).

By the end of 2023, HRZN’s NAV had fallen by 15%, reflecting these challenges.

Yet, the current market conditions and the BDC’s competitive valuation suggest that HRZN is trading at a 15% premium to its NAV, providing a buffer against further market downturns.

Entry Opportunities and Investment Outlook

The recent correction in HRZN’s stock price, coupled with its robust dividend coverage, presents an attractive entry point for investors seeking high-yield opportunities.

Credit: DepositPhotos

The BDC’s operational strategy and ongoing loan originations suggest a continued commitment to growth and dividend sustainability.

Given the broader market’s sentiment and potential risks in the tech and life sciences sectors, HRZN’s position offers a balanced risk/reward profile that could appeal to passive income investors.

A Promising Investment Despite Uncertainty

In conclusion, Horizon Technology Finance stands out as a promising investment in the BDC sector thanks to its disciplined approach to portfolio management and dividend coverage.

Despite facing significant market and sector-specific challenges in 2024, HRZN’s strategic actions and strong dividend yield position it as a resilient option for investors.


You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.

The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.

The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.

By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy

By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.