Hercules Capital (NYSE:HTGC – Get Rating) and MidCap Financial Investment (NASDAQ:MFIC – Get Rating) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, valuation, risk, dividends, institutional ownership, profitability and analyst recommendations.

Dividends

Hercules Capital pays an annual dividend of $1.44 per share and has a dividend yield of 10.2%. MidCap Financial Investment pays an annual dividend of $1.48 per share and has a dividend yield of 12.0%. Hercules Capital pays out 450.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MidCap Financial Investment pays out 202.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital has increased its dividend for 2 consecutive years and MidCap Financial Investment has increased its dividend for 1 consecutive years. MidCap Financial Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Hercules Capital and MidCap Financial Investment's revenue, earnings per share and valuation.

Risk and Volatility

Hercules Capital has a beta of 1.43, meaning that its stock price is 43% more volatile than the S&P 500. Comparatively, MidCap Financial Investment has a beta of 1.58, meaning that its stock price is 58% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Hercules Capital and MidCap Financial Investment, as provided by MarketBeat.

Hercules Capital currently has a consensus target price of $15.86, suggesting a potential upside of 12.78%. MidCap Financial Investment has a consensus target price of $12.17, suggesting a potential downside of 1.48%. Given Hercules Capital's stronger consensus rating and higher probable upside, equities analysts clearly believe Hercules Capital is more favorable than MidCap Financial Investment.

Profitability

This table compares Hercules Capital and MidCap Financial Investment's net margins, return on equity and return on assets.

Insider & Institutional Ownership

23.8% of Hercules Capital shares are owned by institutional investors. Comparatively, 29.3% of MidCap Financial Investment shares are owned by institutional investors. 1.4% of Hercules Capital shares are owned by company insiders. Comparatively, 0.9% of MidCap Financial Investment shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Hercules Capital beats MidCap Financial Investment on 11 of the 17 factors compared between the two stocks.

About Hercules Capital

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Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups, to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, development and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest; particularly in the areas of software, biotech and information services. The firm prefers to invest between $10 million to $250 million in equity per transactions. It invests generally between $1 million to $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in Palo Alto, California with additional offices in Connecticut; Boston, Massachusetts; San Diego, California; Westport, Connecticut; Elmhurst, Illinois; Santa Monica, California; McLean, Virginia; New York, New York; Radnor, Pennsylvania; and Washington, District of Columbia and London, United Kingdom.

About MidCap Financial Investment

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Apollo Investment Corporation (NASDAQ: AINV) , a Maryland corporation organized on February 2, 2004, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940 (the "1940 Act"). In addition, for tax purposes we have elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("the Code"). Our investment objective is to generate current income and capital appreciation. We invest in various forms of debt investments including senior secured loans, subordinated and mezzanine investments and/or equity in private middle-market companies. From time to time, we may also invest in the securities of public companies. Our portfolio is comprised primarily of investments in subordinated debt, sometimes referred to as mezzanine debt, and senior secured loans of private middle-market companies that, in the case of senior secured loans, generally are not broadly syndicated and whose aggregate tranche size is typically less than $300 million. From time to time, our portfolio also includes equi

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