Western Asset Municipal High Income Fund (NYSE:MHF – Get Rating) and MidCap Financial Investment (NASDAQ:MFIC – Get Rating) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, profitability, valuation, risk, institutional ownership, earnings and analyst recommendations.

Risk and Volatility

Western Asset Municipal High Income Fund has a beta of 0.33, indicating that its stock price is 67% less volatile than the S&P 500. Comparatively, MidCap Financial Investment has a beta of 1.6, indicating that its stock price is 60% more volatile than the S&P 500.

Earnings & Valuation

This table compares Western Asset Municipal High Income Fund and MidCap Financial Investment's revenue, earnings per share and valuation.

Profitability

This table compares Western Asset Municipal High Income Fund and MidCap Financial Investment's net margins, return on equity and return on assets.

Institutional and Insider Ownership

17.6% of Western Asset Municipal High Income Fund shares are held by institutional investors. Comparatively, 28.6% of MidCap Financial Investment shares are held by institutional investors. 0.9% of MidCap Financial Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Western Asset Municipal High Income Fund pays an annual dividend of $0.24 per share and has a dividend yield of 3.7%. MidCap Financial Investment pays an annual dividend of $1.28 per share and has a dividend yield of 10.5%. MidCap Financial Investment pays out 175.3% 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 has raised its dividend for 1 consecutive years. MidCap Financial Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings for Western Asset Municipal High Income Fund and MidCap Financial Investment, as provided by MarketBeat.

MidCap Financial Investment has a consensus target price of $12.17, indicating a potential upside of 0.14%. Given MidCap Financial Investment's higher probable upside, analysts plainly believe MidCap Financial Investment is more favorable than Western Asset Municipal High Income Fund.

Summary

MidCap Financial Investment beats Western Asset Municipal High Income Fund on 11 of the 12 factors compared between the two stocks.

About Western Asset Municipal High Income Fund

(Get Rating)

Western Asset Municipal High Income Fund Inc. is a closed ended fixed income mutual fund launched and managed by Legg Mason Partners Fund Advisor, LLC. It is co-managed by Western Asset Management Company. The fund invests in the fixed income markets of the United States. It invests primarily in intermediate and long-term municipal debt securities issued by state and local governments including U.S. territories and possessions, political subdivisions, agencies and public authorities. The fund seeks to invest in investment grade debt securities rated in one of the four highest rating categories by a nationally recognized statistical rating organization to create its portfolio. It benchmarks the performance of its portfolio against the Lehman Brothers Municipal Bond Index. The fund was formerly known as Municipal High Income Fund Inc. Western Asset Municipal High Income Fund Inc. was formed on November 28, 1988 and is domiciled in the United States.

About MidCap Financial Investment

(Get Rating)

Apollo Investment Corporation is business development company and a closed-end, externally managed, non-diversified management investment company. It is elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940 Act) specializing in private equity investments in leveraged buyouts, acquisitions, recapitalizations, growth capital, refinancing and private middle market companies. It provides direct equity capital, mezzanine, first lien secured loans, stretch senior loans, unitranche loans, second lien secured loans and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions. The fund may also invest in securities of public companies that are thinly traded and may acquire investments in the secondary market and structured products. It prefers to invest in preferred equity, common equity / interests and warrants and makes equity co-investments. It may invest in cash equivalents, U.S. government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-U.S. investments, or securities of public companies that are not thinly traded. It also focuses on other investments such as collateralized loan obligations (CLOs) and credit-linked notes (CLNs). The fund typically invests in construction and building materials, business services, plastics & rubber, advertising, capital equipment, education, cable television, chemicals, consumer products/goods durable and non-durable and customer services, direct marketing, energy – oil & gas, electricity and utilities. The fund also invest in aerospace & defense, wholesale, telecommunications, financial services, hotel, gaming, leisure, restaurants; environmental industries, healthcare and pharmaceuticals, high tech industries, beverages, food and tobacco, manufacturing, media – diversified & production, printing and publishing, retail, automation, aviation and consumer transport, transportation, cargo and distribution. It primarily invests in United States. It primarily invests between $20 million and $250 million in its portfolio companies. The fund seeks to make investments with stated maturities of five to 10 years.

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