NMFC

New Mountain Finance ($NMFC) Executives' $15M Buying Spree...13% Dividend vs Performance Decline Dilemma

09/16/2025 21:00

New Mountain Finance ($NMFC) is capturing investor attention as massive insider buying activity at this middle-market lending specialist sends powerful signals to the market. New Mountain Finance is a NASDAQ-listed Business Development Company (BDC) that primarily provides loans and investments to U.S. middle-market companies. Its target companies typically have EBITDA between $10 million and $200 million, focusing on 'defensive growth' sectors like software, healthcare services, and telecommunications. The company currently invests approximately $3 billion across 124 portfolio companies, with 65.3% consisting of first-lien secured loans, creating a relatively safe portfolio structure. The most striking development is the continuous buying by Director Steven B. Klinsky, who purchased over $15 million worth of shares from November to December 2024. Starting with 33,586 shares ($362,607) on November 4, he continued with 140,071 shares ($1,495,972) on November 5, 150,609 shares ($1,637,646) on November 6, conducting large-scale purchases almost daily. Notably, on December 16, he purchased 91,451 shares ($1,073,396) in a single transaction, demonstrating strong conviction. Klinsky is more than just a director. He is the founder and chairman of New Mountain Capital, managing $55 billion in assets as head of a major private equity firm. Having left Goldman Sachs in 1999 to establish New Mountain Capital, he built it into a leader in middle-market buyouts. When such a figure continuously invests his own money, it sends a clear message. The insider buying extends beyond Klinsky. CFO Kris Corbett has consistently purchased shares in August and November 2024, and August 2025. EVP Adam Weinstein bought 45,000 shares ($489,285) in November 2024 and 49,750 shares ($498,828) in September 2025. Director David Ogens also purchased 46,000 shares in March and August 2025, showing strong conviction across the entire management team. However, the stock price hasn't followed these insiders' confidence. Trading around $11 in mid-2024, shares plummeted in November before recovering, then fell to $8.83 in April 2025. While recently recovering to the $10 level, it dropped back to $9.92 on September 15, showing continued volatility. This stock underperformance reflects broader challenges in the BDC sector. $NMFC's Q2 2025 results showed revenue declining 11.7% year-over-year to $83.49 million, with net investment income per share falling from $0.36 to $0.32. Particularly concerning, the payout ratio exceeded 168%, raising questions about dividend sustainability. Yet $NMFC has distinct strengths. Its annual dividend yield of 12.9% appeals to income-focused investors, supported by a high operating margin of 78.73% and robust cash flow of $277.86 million annually. The stock currently trades at approximately 18% discount to net asset value (NAV) of $12.21 per share, offering attractive value investment potential. The falling interest rate environment provides additional tailwinds. With 94% probability of a 25bp Fed rate cut in September, BDCs face reduced funding costs. $NMFC maintains over $1 billion in available borrowing capacity, positioning it to capitalize on new investment opportunities. Investors should focus on the timing and scale of insider buying. Management's aggressive purchases whenever shares wobble around $10 suggests they view current prices as undervalued. Particularly, Weinstein's $490,000 purchase in September 2025 indicates continued management conviction despite recent declines. However, risk factors cannot be overlooked. The debt-to-equity ratio of 135% is elevated, and tightening credit spreads continue pressuring profitability. Bank of America recently maintained its 'Underperform' rating with lowered price targets, reflecting cautious analyst sentiment. Ultimately, investing in $NMFC requires finding balance between insider confidence and market concerns. While pursuing the 13% dividend yield, investors must closely monitor dividend sustainability. While recognizing NAV discount appeal, they must await performance improvement signals. If next quarter's results show slowing revenue decline or credit loss stabilization, the current discounted price could present an attractive entry point.