Jul 17, 2026 4 min read SCM

Stellus Capital Investment Cuts Its Dividend For A Second Time

Stelllus Capital has cut its dividend for a second time in 6 months. The BDC Reporter, though, had anticipated the latest cut based on comments management made months ago. Our investment view has been amended, but the conclusion remains the same.

July 17, 2026

NEWS

HOUSTON, July 16, 2026 /PRNewswire/ – Stellus Capital Investment Corporation (the "Company") (NYSE: SCM) announced that its Board of Directors has declared a monthly dividend of $0.0833 for each of July, August, and September, totaling $0.25 per share in the aggregate for the third quarter of 2026. The regular dividend of $0.25 per share will be paid to shareholders of record in August, September, and October 2026.

Summary of Third Quarter 2026 Regular Monthly Dividends

Declared	Ex-Dividend Date	Record Date	Payment Date	Amount per Share
7/16/2026	7/31/2026	7/31/2026	8/14/2026	$0.0833
7/16/2026	8/31/2026	8/31/2026	9/15/2026	$0.0833
7/16/2026	9/30/2026	9/30/2026	10/15/2026	$0.0833

Prior Dividends

Between 2023 and 2025, the BDC paid a quarterly dividend of $0.40, for a total of $1.60 per year.

During that same period, recurring earnings per share averaged $1.62, although SCM's profitability peaked at $1.92 per share in 2023 and fell to $1.30 per share last year.

Expected

In 2026, the Net Investment Income Per Share consensus is $1.02, followed by $1.03 in 2026.

Left Overs

At the end of 2025, the BDC reported that it still had $1.28 per share of undistributed taxable income to support its dividend payout.

Some of that was used up in the IQ 2026, when recurring earnings (NIIPS) clocked in at $0.26, ($0.08) less than the then-dividend payout.

A similar shortfall probably occurred in the IIQ, given that the analyst consensus is that SCM will again earn $0.26 and has already paid out $0.34 through June 2026.

This would suggest that SCM's "spillover income per share" is down to $1.12.

Not Waiting Around

SCM's management and Board are not waiting around for the spillover to run out and have reduced the quarterly payout - albeit paid in monthly increments - to just under the expected running rate of its recurring earnings going forward.

Given Up

In prior quarters - and most notably in the IVQ 2025 - management had indicated that everything was being done to boost earnings to match the just announced $0.34 a share dividend for the first quarter of 2026.

Management pointed both to its spillover income balance and the incremental income to be received from its third SBIC license.

Forebodingly, though, the BDC's CEO stated that management intended to maintain the $0.34 level through Q2 and would officially reevaluate the distribution rate during the summer of 2026.

As Expected

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The BDC Reporter took SCM at its word and in the BDC Dividend Outlook Table you'll see we projected the full year payout would amount $1.18 per share.

That's $0.34 in the first two quarters and $0.25 in the last two quarters.

At this point, based on the latest analyst earnings consensus, we project SCM will pay $1.00 a share in 2027.

At the current price of $8.01, the effective yield is 12.5%.

INVESTMENT VIEW

SCM was rated a DON'T BUY from our investment standpoint before this latest development.

However, we've amended our viewpoint contained in the BDC Best Ideas Table to reflect the dividend cut.

You'll see that our concern is less about the change in payout than the potential credit weakness.

Here is the updated viewpoint:

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Of late, Stellus Capital (SCM) has seen its portfolio performance weaken. Moreover, its earnings have dropped to a new low. Even more worrying, according to the BDC's own calculations, the percentage of underperforming investments is high, suggesting more pain ahead. For what it's worth, the BDC Reporter has rated SCM's quarterly performance a 4 in the last two quarters. Once again, we see SCM as a "falling knife". Also, as expected, from the IIIQ 2026, the BDC has cut its dividend for a third time in 6 months to $0.25 a quarter. The dividend has been shaved down by (37.5%) since the end of 2025. SCM is a DON'T BUY- Updated 7/17/2026

STOCK PRICE VS EARNINGS CHANGE

We like to make the point to anyone who'll listen that the sharp drop in BDC stock prices we've experienced since 2025 is, in most cases, closely correlated with a corresponding drop in earnings as rates fell, spreads narrowed, etc.

Other commentators see the downward price trend as indicative of the market worried about future credit disruptions from AI or - against all the economic data - of a coming recession.

In defense of our argument, we'll note that SCM's earnings per share have dropped, as mentioned above, from $1.92 in 2023 to an expected $1.02 in 2027.

That's a (47%) drop.

SCM's stock price, as this chart illustrates, peaked in 2023 at an intraday high of $16.08 and is currently trading at $8.12.

That's a very similar (50%) drop.

Good News?

If we're right that BDC prices are just reflecting earnings changes, there is some hope that SCM - and many other BDCs whose earnings are flattening out after years of dropping - will see their stock price bottom out as well.

Right now, some investors are shocked by the dividend cut, resulting in a price loss of over (3.3%).

Once that passes, if SCM can convince the markets that the worst is past earnings-wise, the stock price might consolidate.

After all, a steady 12.5% yield is nothing to sneeze at.

INVESTMENT VIEW POSTSCRIPT

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To be clear, we're not rushing to nab SCM at close to its 52 week low because - as expressed above - we've not yet been convinced there might not be further credit losses coming down the pike. The analysts in their earnings projections don't seem to budget for these potential setbacks so the 2026 and 2027 estimates could be overstated. Rightly or wrongly, we'd like to be reassured that SCM has its credit book under control before changing our investment view.