MidCap Financial Investment (NASDAQ:MFIC) vs. MFS Investment Grade Municipal Trust (NYSE:CXH) Critical Contrast

MFS Investment Grade Municipal Trust (NYSE:CXH) and MidCap Financial Investment (NASDAQ:MFIC) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.

Profitability

This table compares MFS Investment Grade Municipal Trust and MidCap Financial Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFS Investment Grade Municipal Trust	N/A	N/A	N/A
MidCap Financial Investment	42.95%	15.50%	6.22%

Analyst Ratings

This is a summary of recent ratings and recommmendations for MFS Investment Grade Municipal Trust and MidCap Financial Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFS Investment Grade Municipal Trust	0	0	0	0	N/A
MidCap Financial Investment	0	3	3	0	2.50

MidCap Financial Investment has a consensus price target of $14.79, indicating a potential downside of 1.85%. Given MidCap Financial Investment’s higher possible upside, analysts clearly believe MidCap Financial Investment is more favorable than MFS Investment Grade Municipal Trust.

Earnings and Valuation

This table compares MFS Investment Grade Municipal Trust and MidCap Financial Investment’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFS Investment Grade Municipal Trust	N/A	N/A	N/A	N/A	N/A
MidCap Financial Investment	$276.52 million	3.55	$118.76 million	$1.82	8.27

MidCap Financial Investment has higher revenue and earnings than MFS Investment Grade Municipal Trust.

Dividends

MFS Investment Grade Municipal Trust pays an annual dividend of $0.28 per share and has a dividend yield of 3.8%. MidCap Financial Investment pays an annual dividend of $1.52 per share and has a dividend yield of 10.1%. MidCap Financial Investment pays out 83.5% 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 2 consecutive years. MidCap Financial Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

MFS Investment Grade Municipal Trust has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, MidCap Financial Investment has a beta of 1.47, indicating that its share price is 47% more volatile than the S&P 500.

Institutional and Insider Ownership

28.5% of MidCap Financial Investment shares are held by institutional investors. 1.2% of MidCap Financial Investment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

MidCap Financial Investment beats MFS Investment Grade Municipal Trust on 11 of the 12 factors compared between the two stocks.

About MFS Investment Grade Municipal Trust

MFS Investment Grade Municipal is a close ended fixed income mutual fund launched and managed by Massachusetts Financial Services Company. The fund invests in fixed income markets of the United States. It primarily invests in tax-exempt bonds and tax-exempt notes. The fund benchmarks the performance of its portfolio against Barclays Municipal Bond Index. MFS Investment Grade Municipal Trust was founded in May 16, 1989 and is domiciled in United States.

About MidCap Financial Investment

MidCap Financial Investment Corporation (Former name 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 and EBITDA with less than $75 million. The fund seeks to make investments with stated maturities of five to 10 years.