HRZN Stock: Dividend vs NII and NAV After the Monroe Merger

Which Horizon this is, and what changed in April

This page is about Horizon Technology Finance Corporation of Farmington, Connecticut, a business development company (BDC) that files with the SEC under CIK 1487428 and trades as HRZN on the Nasdaq. Its 6.25% notes due 2027 trade on the New York Stock Exchange as HTFC. It is externally managed by Horizon Technology Finance Management LLC, an affiliate of Monroe Capital, and pays that adviser a base fee of 2.00% of gross assets less cash (1.60% on gross assets above $250 million) plus a 20% incentive fee on income above a 1.75% quarterly hurdle, per the June 10-Q. Nothing about the name or ticker changed in 2026; what changed is the company around them.

On April 14, 2026 Horizon completed its merger with Monroe Capital Corporation (MRCC). Each MRCC share became 0.9402 Horizon shares, which meant about 20.4 million new Horizon shares, and the 10-Q puts ownership after closing at 70.14% legacy Horizon holders and 29.86% former MRCC holders. MRCC sold its investment portfolio to Monroe Capital Income Plus Corporation (MCIP), a private BDC, immediately before the merger, so Horizon did not take over MRCC's loans: it received about $141 million of cash. The merger agreement used closing NAVs of $6.91 per Horizon share and $6.50 per MRCC share as of April 11, 2026; $6.91 times 0.9402 is $6.50 (our arithmetic), which is why legacy holders were not diluted at NAV. The adviser also agreed to waive $4.0 million of fees at $1.0 million a quarter from the quarter ending September 30, 2026 through June 30, 2027.

Two other changes sit in the 8-Ks. Five directors resigned effective at closing, the board size was reduced to four and one new independent director was elected under the merger agreement; on May 13 the board dismissed RSM US LLP, auditor since 2008, and appointed Grant Thornton LLP for 2026, reporting no disagreements. The latest filings are the 10-Q and earnings release of August 4, 2026, a July 30 distribution declaration, and a September 9 8-K extending the legal final payment date of a subsidiary's asset-backed notes to December 10, 2035. As of October 19, 2026 no Q3 date has been announced in the SEC filings we read; last year the company reported on October 28, and this year it reported Q1 on May 5 and Q2 on August 4.

NII against the dividend: eight quarters

The table uses each quarter's earnings release. “Declared” is the per-share figure in the release's income statement, which counts the quarter in which the board declared the payments. “Payable” is what reached holders in the quarter, from the monthly distribution releases. The percentage columns are NII per share divided by each (our arithmetic).

The two views disagree in the first half of 2026 because of timing. The board declared the April to June payments of $0.06 in February, so the first quarter's income statement shows $0.18 declared, but the January to March payments were still $0.11 a month, declared in October 2025. On a payable basis the first quarter paid $0.33 against NII of $0.19. The fourth quarter's release makes the connection itself: the CEO wrote that “NAV per share was modestly lower due to our distributions paid in the fourth quarter exceeding our NII.” In Q4 2025 NII was $8.3 million, or $0.18, “impacted in the quarter by lower prepayment activity”.

The year totals show the slide that came before the cut. NII per share was $1.98 in 2023, $1.32 in 2024 and $1.05 in 2025, while declared distributions were $1.37 in 2024 and $1.32 in 2025. NAV per share ended 2023 at $9.71, 2024 at $8.43 and 2025 at $6.98. The company says it has paid $360 million in distributions since its 2010 IPO.

What the payout is now, and when the special stops

The board declared the new level on February 27, 2026. The CEO wrote in the March 3 Q4 release that it is one “which we believe aligns our distribution level with our anticipated NII and operating results for 2026”. The schedule below is from the three distribution releases of March, May and July 2026; record and ex-dividend dates are the same day.

As of October 19, 2026 the October 16 ex-dividend date has passed and the next is November 17. No distribution beyond the December 15, 2026 payment has been declared in the filings we read. The April 14 release is what limits the special: the board's intent to supplement the regular payout covers “its next two fiscal quarters following the closing of the merger”, with the first special in July and all subject to board declaration. The special is paid from undistributed taxable earnings, which the company put at $27.6 million at December 31, 2025. The release gives the conditions the board will weigh, including asset coverage and covenant compliance.

Annualized, the regular $0.06 a month is $0.72 a share, 11.6% of the $6.23 NAV, and with the special $1.08, or 17.3% of NAV (our arithmetic). The 17.3% is the figure our BDC stocks list shows. It is a payout against book value, not a market yield: at the $4.54 average price the company paid for its own shares in the second quarter, $0.72 is 15.9% (our arithmetic), but that price is a historical buyback average, not a current quote, and this page has no live price.

Spillover income is the cushion behind the special. Per share it was $1.06 at December 31, 2024, $1.00, $0.94 and $0.93 through September 2025, $0.65 at December 31, 2025, $0.52 at March 31, 2026 and $0.33 at June 30, 2026. The June figure is after more shares were issued in the merger, which the release notes. Once July to September and October to December specials are paid, about $0.15 per share is left before any new taxable income (our arithmetic). When the special ends, the regular $0.18 a quarter is the payout NII has to cover, and ex merger costs Q2 NII did exactly that.

Q2 2026: merger costs, PIK and one write-down

Income is flat and expenses are not: interest expense fell $0.4 million, the base fee rose $0.2 million, and the merger line added $4.4 million. The incentive fee was zero in the quarter because the company's cap and deferral mechanism reduced it by $0.4 million, and the 10-Q's contractual-obligations table carries a $25.4 million incentive-fee deferral line. The share of income that arrives as payment-in-kind (PIK) interest, which is added to the loan rather than paid in cash, rose from about 1% to about 6%.

The write-down is the part that moved NAV. The CEO wrote that the company was “disappointed to learn during June about some significant negative news for a single portfolio company, including the outlook for its future equity raising plans.” The release does not name it. The 10-Q's table of non-controlled affiliates, companies where Horizon owns 5% to 25% of the voting securities, shows one name whose value moved by that scale:

That loss is $0.59 per weighted basic share and 99% of the quarter's net unrealized depreciation of $38.5 million (our arithmetic). At June 30 the schedule of investments carries Shengrow's common and preferred stock, which cost $14.5 million, at zero, and one of its term loans is on non-accrual. We cannot tell from the filings whether this is the company the CEO meant; it is the only name in the affiliate table that matches the size of the loss.

NAV: $9.06 to $6.23 in seven quarters

Per share NAV fell in five of the last seven quarters, was flat once (March 2026) and rose once, in the September 2025 quarter, when unrealized appreciation was $40.5 million. The pattern is realized losses that keep arriving ($33.9 million in Q3 2024, $22.5 million in Q3 2025 and $23.3 million in Q4 2025) and unrealized marks that reverse them or not.

Net assets rose from $333.9 million to $417.5 million in the second quarter even as NAV per share fell, because 20.4 million shares were issued in the merger. The merger press release put pro forma net assets right after closing at $471.7 million; the $54.2 million gap to June 30 covers eleven weeks of losses, distributions, buybacks and merger costs and is not a like-for-like change (our arithmetic). Shares outstanding were 66,978,865 at June 30 and 67,033,909 on August 4. Weighted basic shares went from 47.3 million in Q1 to 65.0 million in Q2, so per-share comparisons across the merger are not on one base.

The loan book: ratings, non-accruals and sectors

At June 30, 2026 the debt portfolio was 43 secured loans at $648.0 million fair value, 95.8% of a $676.7 million portfolio, up from 38 loans and $596.0 million at the end of 2025. The five largest debt investments were 25% of debt at fair value and none was above 10%. By sector, medical devices were 34.4% of debt, software 34.6% (technology) plus 6.5% (healthcare information and services), biotechnology 12.7% and other healthcare 4.6%.

On June 30 the company moved its internal credit scale to the one used by Monroe Capital, from 4-to-1 (4 best) to 1-to-5 (1 best), and recast earlier periods. The two scales are not comparable (the 2.9 weighted average reported at December 31 became 2.4 on the new scale; June 30 was 2.3).

Loans rated 4 or 5 had a cost of $115.1 million and a fair value of $79.3 million (our arithmetic from the 10-Q), and the company attributes the rise to “the difficult equity fundraising market”, low cash positions and underperformance. Non-accruals are a different and smaller list. The schedule of investments flags four loans as on non-accrual at June 30, 2026 and three at December 31, 2025:

The Shengrow row looks small because only one of its loans carries the flag. Its seven term loans together are on the schedule at $16.8 million of cost and $2.2 million of fair value, and its two revolvers at $9.2 million of cost and $10.0 million of fair value, which add to the $12.2 million in the affiliate table (our arithmetic). Venture lenders also hold warrants and equity: the company reported warrant and equity positions in 88 companies at June 30, and $28.7 million of warrants, equity and other investments plus a joint venture.

Debt, liquidity and the next maturities

The merger cash and new shares did most of the work on leverage: borrowings fell from $473.0 million at December 31 to $402.4 million, including the $57.5 million 4.875% notes repaid at their March 30, 2026 maturity, while net assets rose to $417.5 million and cash and money market funds to $135.0 million. Net debt to equity went from 113% at March 31 to 65% at June 30, against a 120% target, and asset coverage was 203% against the 150% legal minimum.

By period the 10-Q shows $75.1 million of borrowings due in under a year, $203.4 million in one to three years, $124.0 million in three to five years and $2.8 million after that; cash and money market funds of $135.0 million cover the first bucket (our arithmetic). Unfunded commitments to portfolio companies were $153.5 million. Committed backlog was $228 million at June 30, up from $180 million at March 31. Fixed-rate paper in the stack costs 5.50% to 7.125%, and the two insurance-company facilities run at 6.61% and 7.21%.

HRZN against Trinity Capital and Runway Growth

All three lend to venture-backed and growth companies. The other two columns are taken from our own pages, which cite those companies' filings; the HRZN column is from this page. Dates are June 30, 2026 unless stated.

The ratios use different denominators (debt at fair value for HRZN and TRIN, total portfolio for RWAY), so the non-accrual row is a guide, not a ranking. Read across, HRZN has the lowest NAV per share of the three, a regular payout it cut in 2026, and a ratings table that shows more credit stress than its non-accrual list. For the other two, see our pages on Trinity Capital and Runway Growth, and on the larger venture lender Hercules Capital.

What a holder or reader can do with this

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

• Separate the regular payout from the special. $0.18 a quarter is the payout that continues after December 2026 if the board keeps the current level; the extra $0.09 is drawn from spillover income that was $0.33 per share on June 30.
• Read the Q3 release for six lines: NII per share against $0.18, whether any 2027 distribution is declared and at what level, the spillover balance, NAV per share and what happened to Shengrow, the 4 and 5 ratings (4 loans, 5 loans), and how much of the $228 million backlog was funded.
• Watch the buyback test. The program buys only below 90% of the last reported NAV and up to 2% of shares. At $6.23 that line is about $5.61 (our arithmetic); the second quarter's $4.54 average was far below it.
• Compare with a non-traded BDC on what you can see. Monroe's private vehicle, Monroe Capital Income Plus, bought MRCC's portfolio and met tender requests by taking 77.7% in August at $9.77; HRZN has a daily price and no tender lottery, and a NAV that moves with marks. The non-traded BDC list, what a BDC is and BDC non-accruals in 2026 cover the structure and the credit risk.
• Mind the tax paperwork. BDC distributions arrive on Form 1099-DIV after year end and may include return of capital; see our 1099-DIV timeline.

FAQ

All figures are from Horizon Technology Finance Corporation's SEC filings read on EDGAR on October 19, 2026: the earnings releases (Exhibit 99.1) for the quarters ended December 31, 2024 (accession 0001437749-25-006110), March 31, 2025 (0001437749-25-013539), June 30, 2025 (0001437749-25-025489), September 30, 2025 (0001437749-25-031987), December 31, 2025 (0001437749-26-006627), March 31, 2026 (0001437749-26-014892) and June 30, 2026 (0001437749-26-025688); the distribution releases of March 4 and April 29, 2025, August 7 and October 28, 2025, March 3, May 5 and July 30, 2026 (0001437749-25-006112, -25-013538, -25-025496, -25-032019, -26-006631, -26-014895 and -26-025691); the Form 10-Q for June 30, 2026 (0001437749-26-025689); the 8-K and press release of April 14, 2026 (0001140361-26-014610); the 8-Ks of May 14, June 26 and September 9, 2026 (0001437749-26-017078, -26-021848 and -26-029978). Trinity Capital and Runway Growth figures are from our own pages on those companies, which cite their filings. Percentages of one figure against another, sums across periods, the spillover remainder, annualized payouts against NAV and the repurchase threshold are our arithmetic. Yield on debt investments, backlog and internal credit ratings are company measures. This is analysis of public documents, not investment, legal or tax advice.