Shares of Blue Owl Capital Corp (NYSE:OBDC) and Blue Owl Technology Finance Corp (NYSE:OTF) fell in premarket trading after each fund announced a cut to its quarterly dividend. Blue Owl Capital was down 3.9% to $11.30, while Blue Owl Technology Finance slid 2.7% to $11.41.
Blue Owl Capital reduced its payout to $0.31 per share from $0.36. Blue Owl Technology Finance declared a quarterly dividend of $0.35 per share, down from $0.40 previously, and also announced a separate special dividend of $0.05 per share.
Company leadership attributed the weaker performance to a more difficult earnings environment. CEO Craig Packer said, "the quarter reflected a more challenging earnings environment driven by lower base rates and tighter spreads." The firms also pointed to higher borrowing costs as a factor that weighed on results.
Despite the pressures on earnings, management noted a decline in the rate of non-accrual investments compared with the prior quarter. That metric suggests some improvement in credit performance even as other elements of the business faced headwinds.
Both funds engaged in share repurchases during the first quarter, buying back a combined $85 million of their own stock. The buybacks indicate management deployed capital to repurchase shares even as dividends were trimmed.
Market performance this year has lagged for the two funds. As of Wednesday’s close, OBDC was down 5.3% year-to-date, while OTF had declined 19% year-to-date.
The announcements highlight near-term stress on distributable earnings for these credit-focused funds as interest rate dynamics and borrowing costs shift. The funds’ actions - reducing regular dividends while executing buybacks and noting lower non-accrual rates - reflect a mixed set of balance-sheet and income-statement developments within the quarter.
Investors will likely weigh the reduced income stream against the firms' continued repurchases and the reported improvement in non-accruals when assessing near-term outlooks for the funds.