MSDL

Morgan Stanley Direct Lending Fund ($MSDL): CEO-CFO August Buying Spree Plus 11% Dividend Yield - Is $17 Floor the Opportunity?

08/15/2025 19:32

Senior executives at Morgan Stanley Direct Lending Fund ($MSDL) made concentrated stock purchases in mid-August, drawing attention to the possibility that the stock price floor formed in the high $17 range could present an investment opportunity. Morgan Stanley Direct Lending Fund is a Business Development Company (BDC) that provides direct loans to U.S. middle-market companies. It primarily focuses on senior secured loans to companies backed by private equity sponsors, pursuing premium yields while accepting higher risks. With a market capitalization of approximately $1.65 billion, it's dual-listed on the NYSE and Nasdaq, having raised about $103 million through its IPO in January 2024. From August 11 to 14, a series of large-scale purchases by top executives occurred over just four days. CEO Michael Occi Jr. purchased 14,000 shares at an average price of $17.78, totaling approximately $249,000. CFO David Pessah bought 3,400 shares at $17.72 for about $60,000. Co-President Jeff Day purchased 5,650 shares at $17.70 for $100,000, while Director Joan Binstock bought 5,659 shares at $17.68 for approximately $100,000. The total volume purchased by four executives reached 28,709 shares worth about $450,000. This concentrated buying suggests management views the current stock price as significantly undervalued. The simultaneous large purchases by both the CEO and CFO using their own funds signals strong confidence in the company's fundamentals and future prospects. $MSDL's stock price started around the low $20s in June 2024 but fell sharply after mid-July to the $17-18 range. While it recovered near $20 in January this year, it declined back to the $17 range after April and has maintained this level. At the August 14 closing price of $17.67, it's down about 19% from its 52-week high of $21.75. Financially, $MSDL displays both the appeal and risks characteristic of BDCs. Its forward dividend yield reaches 11.32%, providing strong incentives for income-focused investors. It pays an annual dividend of $2.00 per share, with the next ex-dividend date scheduled for September 30. The P/B ratio of 0.86 suggests undervaluation relative to book value, though this may reflect credit risks in the loan portfolio. However, there are factors investors should carefully consider. The debt-to-equity ratio of 114.52% represents high leverage even for a BDC, potentially increasing financial risk if credit conditions deteriorate. Additionally, the one-year return of just 0.60% significantly underperforms the S&P 500's 16.44%. Nevertheless, several positive factors are converging at this point. Management's concentrated purchases likely signal a price floor, and the high dividend yield could become more attractive amid expectations of falling interest rates. Morgan Stanley's expertise and network in middle-market lending also provide competitive advantages. The key focus ahead will be the earnings announcement scheduled for November 6. Management's outlook on loan portfolio health, net interest margins, and dividend sustainability will likely determine stock direction. Particularly crucial will be what earnings guidance management provides following their large purchases. From an investment strategy perspective, $MSDL merits consideration for investors seeking high dividends and credit investment diversification. However, the credit risks inherent to BDCs, high leverage, and underperformance relative to the market remain risk factors requiring thorough evaluation. The key investment decision will be whether management's strong buying signal and attractive dividend yield provide sufficient compensation to offset these risks.