HTGC is an attractive high-yield investment due to strong credit quality (0.1% troubled loans) and good portfolio performance, outweighing concerns about software exposure.

But, the first high yield stock that looks very interesting at its current prices is Hercules Capital, stock ticker HTGC.

Now, one of the things we have to understand is when we look at the stock price in the last year, it's down by around 11%, and year-to-date, down by about 9.4%.

Obviously, compared to the broader market, that is some serious underperformance. But, we also need to understand the type of stock we're looking at. We're looking at a business development company, a BDC.

To start, let's talk about the dividend yield. If we zoom in and scroll down, we can see Hercules Capital right here. If we start to scroll over, we can see the base dividend right here listed at about 9.5% and the total dividend listed at 11.1%.

Why is there two different dividend yields shown? Well, what we have to understand is these BDCs will frequently pay out special dividends when they have the opportunity to. So, when we look at the dividend history here on Seeking Alpha, which link in the description by the way, in the dark gray color here, we can see these are the base dividends that are being paid out.

But on top, in the orange, these are the special dividends that are being paid on top base dividend. What we have to understand is these special dividends aren't guaranteed. They distribute them when they're possible.

But this is why the initial yield you see on a lot of softwares is misleading because the yield here on Seeking Alpha is 11.1%. When in reality, the base dividend yield for this BDC is sitting at 9.5%.

And if we look at the base dividend coverage, basically, it's sitting at 100%, essentially meaning the company is using all their net investment income right now to pay out dividends, which in short means it's going to be difficult for them to maintain those special dividends over the next year.

So, the reality is you're more than likely going to get a yield of closer to 9.5% versus 11.1% if you buy this stock today, at least based on how the current numbers look. Now, with that being said, why is this BDC down so much?

However, this hasn't changed nearly as much. A lot of these BDCs have significant exposure to software companies in their portfolio, which generally speaking the market feels are the type of companies that are prone to disruption from AI.

And if we look at Hercules Capital right here, HTGC, we can see about 33, close to 34% of their loan portfolio is tied up with tech/software companies. That's a major concern for a lot of investors.

During Q2 of 2026, Hercules generated 50 cents per share of net investment income, which comfortably covered the 40-cent regular dividend, not the total dividend, by 125%. So, for Q2, that's a good sign.

Only 0.1% of HTGC's portfolio is currently made up of troubled loans that have stopped generating interest income, which really highlights the company's exceptionally strong credit quality. I mean, 0.1% that's incredibly low for a BDC.

Yes, software exposure is high, but the overall portfolio has done tremendously well, which when you look at the company's valuation, it starts to make sense. Yes, they're trading at about their historic average valuation multiple of 1.37, while the 10-year average is 1.38.

But, even then, if you look at it in the last 5 years, they're still trading on the lower end of their valuation multiple.

But, at the exact same time, if they can maintain a 9.5% yield, while simultaneously slowly growing their net asset value, which is exactly what analysts are projecting them to do over the next 3 years, then they have every right to be trading at a slight premium when we look at the price to tangible book value per share.

But, when you start to dive into the underlying loan portfolio and the dividend coverage for this BDC, you can see this looks like one of the more attractive opportunities, particularly in the very high yield space.