GLAD Stock: $0.15 Monthly Dividend vs NII, NAV, Non-Accruals

What GLAD is, and two premises to correct

GLAD is a business development company (BDC) that lends mostly to small private companies owned by private-equity sponsors or owner-operators, what it calls the lower middle market. At June 30, 2026 it held 59 portfolio companies in 24 states, $953.3 million at fair value, 89.4% of it debt. The 10-Q says it has been externally managed by Gladstone Management Corporation since October 1, 2004, and that the Adviser is 100% indirectly owned by its chairman. Our explainer on BDCs covers the structure; the sister fund Gladstone Investment shares the Adviser and its officers (the March 23, 2026 8-K names the same chief investment officer for both) but reports its own, different numbers.

Two premises in circulation need correcting. First, the 8-K filed October 1, 2026 is an Item 5.02 report: Michael McQuigg became President on that date, as announced on March 23, 2026, and Robert Marcotte, who had been CEO and President since David Gladstone stepped down as CEO on March 20, 2026, remains CEO. It declares nothing. Second, the 1-for-2 reverse stock split is not new: it took effect April 4, 2024 (trading April 5), and every per-share figure in the filings since is restated for it. NAV of $9.39 in the fiscal 2023 10-K is $18.79 in later ones.

The monthly $0.15: what it is, and what covers it

The board declares three monthly distributions each quarter, based on its estimate of taxable income. The schedule below is from the June 2026 10-Q.

Through fiscal 2025 the monthly rate was $0.165 (restated for the split; it was $0.0825 before), plus two supplementals: $0.40 paid December 18, 2024 and $0.10 paid September 29, 2025. Nothing in the 10-K or the November 2025 release we read explains the lower rate; the release's quote from management is that the refinancing and modest leverage “positioned us well to deliver continued asset growth and sustain our net interest income in support of future shareholder distributions.” No SEC filing since October 1 declares October to December 2026 distributions. News reports dated October 13 to 15, 2026 say the board declared $0.15 a month again for those three months, with record dates October 23, November 19 and December 21 (secondary sources, not verified in a filing).

The table puts the quarterly NII per share next to what was paid, with and without the preferred dividends.

After-preferred NII is NII minus preferred stock dividends, divided by shares outstanding at quarter-end (22,329,852 until June 2025, 22,593,069 after). The company reports NII before preferred dividends and shows them as a separate line under net increase in net assets; its own financial highlights show them as a deduction of $0.08 a share in the nine months to June 30, 2026. Two things flatter the March 2026 quarter. The earnings release for the June quarter says other income fell $2.6 million because of “a one-time dividend and prepayment fee income” in the prior quarter; that is about $0.11 a share (our arithmetic). And the June quarter's NII of $11.0 million includes $1.6 million of portfolio company fee credits (see the adviser section below).

The ten-year view shows how unusual fiscal 2025 was. Figures are per share and restated for the reverse split.

For fiscal 2016 to 2021 the company paid what it earned, almost to the cent. From 2022 NII ran ahead of the dividend and NAV rose from $18.16 to $21.34 over three years; fiscal 2025 reversed the pattern, because of the $0.50 of gains distributed. The $1.80 a year now is below each of the last three fiscal years ($1.89, $1.98 and $2.48) and above every year before them. Of calendar 2025's distributions, 93.7% were deemed ordinary income for 1099 purposes and 6.3% capital gains; for calendar 2024 the split was 83.1% and 16.9%.

The preferred stock: a growing line below NII

GLAD sells 6.25% Series A Cumulative Redeemable Preferred Stock at $25 a share through its affiliated dealer manager, Gladstone Securities, on a “reasonable best efforts” basis. The offering ends on December 31, 2026 unless extended or sold out. The numbers from the June 2026 10-Q:

Gladstone Securities may receive selling commissions of up to 7.00% and a dealer manager fee of up to 3.0% of gross proceeds. In the nine months to June 30, 2026 it was paid $3.0 million, about 10.1% of the $29.6 million raised (our arithmetic). The 10-Q states Gladstone Securities is 100% indirectly owned and controlled by the chairman. The preferred stock is not listed; it is classified in temporary equity ($45.0 million net of costs at June 30, 2026) and can be subject to mandatory redemption if asset coverage falls under 150%. For a common holder the issue is not the 6.25% coupon, which is below the 6.8% weighted average rate (including unused fees) on the bank line in the June quarter, but that each $25 share sold nets the company about $22.30 (our arithmetic from net and gross proceeds) and ranks ahead of the common for $0.130208 a month.

The Adviser's credits: how much of NII they are

GLAD pays a base management fee of 1.75% a year on average total assets, an income incentive fee that starts when quarterly pre-incentive NII passes 1.75% of net assets (100% catch-up to 2.1875%, then 20%), and a 20% capital gains fee. It also pays a 1.5% loan servicing fee on loans pledged to the bank facility, which the Adviser credits back in full against the base fee. On top of that the Adviser credits fees it earns from portfolio companies against the base fee and, until recently, part of the incentive fee. The 10-Q calls these credits “non-contractual, unconditional and irrevocable”.

Two readings. The incentive fee credit of $2.3 million in the first nine months of fiscal 2025 is gone, and with interest expense up 28.1% it is a main reason NII rose 1.0% while investment income rose 15.1% (reported). And the footnote to the financial highlights says: “Had we not received any non-contractual, unconditional and irrevocable credits of fees from the Adviser”, NII would have been 6.32% of average net assets annualized for the nine months to June 30, 2026, against the 9.42% reported (5.84% against 9.41% a year earlier). That comparison includes the loan servicing credit, which is a pre-payment of the base fee and not a waiver, so it overstates the gift; the portfolio company fee credit alone was $3.6 million in nine months. The Advisory Agreement was renewed on July 14, 2026 through August 31, 2027.

NAV and price: the premium that went away

NAV per share has held in a $21 to $22 band since fiscal 2024 while the price has not.

From December 31, 2024 to March 31, 2026 the price fell 39.0% and NAV fell 0.7% (our arithmetic). Total return on the market price was -4.82% for the nine months to June 30, 2026 and 20.16% for the same months a year earlier. We do not have a price after June 30, 2026 from a primary source; check a live quote. The June 30 close puts the $1.80 annual distribution at 9.3% of price and 8.4% of NAV (our arithmetic).

The nine-month NAV bridge for fiscal 2026, per share, from the 10-Q's financial highlights: NAV $21.34 at September 30, 2025; NII +$1.51; net realized and unrealized gain on investments +$0.16; net loss on other items -$0.08; preferred stock dividends -$0.08; distributions -$1.35; NAV $21.50. Fiscal 2025 for comparison: NAV $21.18; NII +$2.02; gains +$0.57; other +$0.01; preferred -$0.04; distributions -$2.48; share issuance above NAV +$0.08; NAV $21.34. In the nine months to June 30, 2025 the company sold 99,265 shares through its at-the-market program at an average $24.90, when the price was above NAV; it sold none in the nine months to June 30, 2026 and $129.4 million of capacity remains. Selling common stock below NAV would dilute NAV, and the company's other equity-like source is the preferred stock above.

Non-accruals: back to five borrowers

A loan goes on non-accrual when the company stops recognizing interest on it. The 10-Q and the earlier filings give the path:

The same three names, B+T Group, Edge Adhesives and WB Xcel, have been on non-accrual for two to three years, carried at $13.0 million against $28.8 million of cost at March 31. The June quarter added two controlled borrowers. The lines flagged in the June 30, 2026 schedule of investments are:

The 10-Q text says non-accruals were $46.0 million at cost and $26.7 million at fair value. Our sum of the schedule is $4,450 thousand and $3,842 thousand higher on each basis, exactly the Lonestar EMS term loan, which is flagged in the schedule but appears not to be counted in the text. Either the text or the flag is off; the 10-K will show. On the 5.2% and 3.1% the company reports, Eegee is the largest single line: a borrower named Eegee's LLC was on the list at December 31, 2024 and March 31, 2025, off by June 30, 2025, and a differently named Eegee Acquisition Corp. is on it again at June 30, 2026. The filings we read do not say whether it is the same business after a restructuring. Edge Adhesives also holds $5.5 million of preferred stock carried at zero.

PIK interest (interest added to the loan instead of paid in cash) is moderate but moved: $763 thousand in the December 2024 quarter (3.5% of investment income), $1,996 thousand in the September 2025 quarter (8.3%, our arithmetic), $2,301 thousand in December 2025 (9.4%) and $1,465 thousand in June 2026 (6.0%).

A debt portfolio with an equity sleeve

Equity is the part that explains fiscal 2025's gains. Equity investments were 16.0% of the portfolio at fair value at September 30, 2024, $127.6 million, after $42.7 million of unrealized appreciation that year; in fiscal 2025 the company realized $55.4 million of gains and took $42.7 million of unrealized depreciation, and equity was 10.0% at September 30, 2025.

Second lien debt grew from 17.5% to 19.5% of the portfolio in nine months, and the 10-Q's largest industry, diversified and conglomerate manufacturing, went from 23.6% to 30.4% while healthcare, education and childcare went from 31.8% to 23.1%. The five largest investments are 21.3% of the portfolio, the average investment is $16.4 million at cost, and the weighted average yield on interest-bearing investments fell from 13.1% in the December 2024 quarter to 11.8% in the June 2026 quarter. In the nine months the company invested $138.5 million in nine new portfolio companies, extended $86.3 million to existing ones and received $139.3 million of proceeds and repayments from five exits and repayments by existing companies; the portfolio grew $92.0 million at cost.

Rates matter. 83.6% of debt is floating, and the 10-Q's own table has a 100 basis point fall in rates cutting net increase in net assets from operations by $5.5 million over a year, about $0.24 a share (our arithmetic), before any effect on incentive fees; one-month SOFR was 3.65% at June 30, 2026. That is 13% of the $1.80 annual distribution.

Leverage and the maturity ladder

Asset coverage was 218.6% at June 30, 2026 against a legal minimum of 150%, down from 270.9% in March 2025 as the company moved from almost no borrowing to a drawn bank line. Debt to net assets was 0.90x counting the bank line and notes at cost, and 1.00x with the preferred at its liquidation preference (our arithmetic: $437.0 million and $487.3 million over $485.7 million). Interest expense was $6.5 million in the June 2026 quarter against $4.5 million a year earlier, up 45.1%.

In October 2025 the company redeemed the 7.75% Notes due 2028 ($57.0 million, October 15) and the 5.125% Notes due 2026 ($150.0 million, October 31, which would have matured January 31, 2026), and in September 2025 had issued the $149.5 million convertible. The shortest dated obligation is the $50.0 million of 3.75% notes due May 1, 2027, 6.5 months from today; the bank line had $172.5 million of availability at June 30, subject to its borrowing base, and 40 obligors in the base against a minimum of 25. Contractual principal repayments from the portfolio are $84.6 million in fiscal 2027 and $312.8 million in fiscal 2030 (assuming no early prepayment). The convertible adds 5.8 million shares if converted (our arithmetic; diluted weighted shares were 28,364,875 against 22,593,069 basic), but the $25.90 conversion price is above the June 30 close of $19.42.

What changed in the filings and what comes next

The latest filings are the Form 10-Q for June 30, 2026 and earnings release of August 4, 2026, the 8-K of June 5, 2026 for the $60.0 million of 7.000% notes, and the October 1 management 8-K. In the release, the company's president said deal flow and spreads “supported a solid increase in our core net interest income last quarter”; the numbers above show interest income up 4.7% for the quarter and NII down 7.0% from the March quarter's.

The fiscal year ends September 30, so the Form 10-K for fiscal 2026 is next. The company has filed it on November 13, 2023, November 13, 2024 and November 17, 2025, and no filing we read announces this year's date. It will show the September 30 NAV, the fiscal 2026 NII and the final non-accrual schedule, and the tax character of the year's distributions. After that the 10-Q for December 31, 2026 should follow in early February (last year's was filed February 4). The Series A offering ends December 31, 2026 unless extended, and the 3.75% notes mature May 1, 2027.

What a holder or reader can do with this

This is a checklist built from the filings, not a recommendation.

• Use after-preferred NII, not the headline. $0.455 against $0.45 in June leaves almost no room; a quarter like March, with one-time income, flatters the picture.
• Read the 10-K's non-accrual schedule against the 10-Q text. The $4.45 million Lonestar line either belongs in the total or does not, and Eegee is the largest line.
• Watch the preferred issuance. Preferred dividends rose 4.3 times in six quarters, and the offering has until December 31, 2026 unless extended.
• Compare price with NAV on the day you look. The last NAV is $21.50 at June 30; the next is due with the 10-K.
• If you also hold a non-traded BDC, compare its non-accrual rate and PIK share with these in our census of BDC non-accruals, see where GLAD sits among the listed BDCs, and for another lower middle market lender read our page on Main Street Capital.
• Tax. The split between ordinary income, capital gains and return of capital is on your Form 1099-DIV; we do not give tax advice.

This is analysis of public documents, not investment, legal or tax advice. We do not give price targets or say whether to buy, sell or hold.

FAQ

All figures are from Gladstone Capital Corporation's SEC filings read on EDGAR on October 16, 2026 (CIK 1143513): the Forms 10-K for the years ended September 30, 2023, 2024 and 2025 (accessions 0001143513-23-000013, 0001143513-24-000011, 0001143513-25-000015); the Forms 10-Q for June 30, 2024, December 31, 2024, March 31, 2025, June 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026 (0001143513-24-000008, -25-000005, -25-000008, -25-000012, -26-000004, -26-000009, -26-000012); the earnings releases (Exhibits 99.1) of November 17, 2025, February 4, May 6 and August 4, 2026 (0001193125-25-284668, -26-037714, -26-209037, -26-332851); and the 8-Ks of March 23, June 2, June 5 and October 1, 2026 (0001193125-26-118675, -26-252617, -26-259535, -26-410659). The October 13, 2026 distribution announcement is cited from a news report and is not in a filing we found. Calculations marked “our arithmetic” are ours.