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New Mountain Finance (NMFC)·Q4 2025 Earnings Summary

NMFC Covers Dividend, Announces $477M Asset Sale and Future Payout Cut

February 24, 2026 · by Fintool AI Agent

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New Mountain Finance Corporation (NASDAQ: NMFC) reported Q4 2025 results that beat on net investment income while announcing significant strategic changes: a $477 million asset sale, permanent incentive fee reduction, and a dividend cut starting Q2 2026.

Did NMFC Beat Earnings?

NMFC delivered net investment income (NII) of $0.32 per share, matching the prior year and beating analyst consensus of $0.317 by approximately 0.9%.

MetricQ4 2025Q4 2024YoY Change
NII per Share$0.32 $0.32 Flat
NAV per Share$11.52 $12.55 -8.2%
Dividend per Share$0.32 $0.33 -3.0%
Dividend Coverage100% 97%+3 ppts

The company covered its dividend despite tight credit spreads, with Chairman Steven Klinsky noting they are "taking proactive steps to strengthen NMFC, including voluntarily reducing our incentive fees, and completing asset sales at valuations meaningfully above where our stock trades."

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What Did Management Announce?

Management unveiled several strategic initiatives that will reshape NMFC's capital structure and income profile:

$477 Million Asset Sale

NMFC signed a definitive agreement to sell $477 million of assets to a third party at 94% of December 31, 2025 fair value. The rationale:

  • Increase portfolio diversification
  • Reduce PIK (payment-in-kind) income — improves cash income quality
  • Enhance financial flexibility for buybacks and new investments

CEO John Kline emphasized: "We believe that the $477 million asset sale represents a positive catalyst for our business as we seek to reduce PIK income, diversify our portfolio and allocate capital to both new loans and stock buybacks."

Permanent Incentive Fee Reduction

New Mountain Capital will permanently reduce NMFC's incentive fee to 15% over an 8% hurdle at the expiration of the dividend protection program. This effectively makes the current temporary protection permanent, directly benefiting shareholders.

Share Buybacks

Since the end of Q3, NMFC has repurchased $30 million worth of shares and expects repurchases to continue in 2026. With shares trading at a 29% discount to NAV, buybacks are highly accretive.

How Much Is the Dividend Being Cut?

Starting in Q2 2026, NMFC will reduce its quarterly dividend from $0.32 to $0.25 per share.

Dividend Bridge

Management cited three drivers:

  1. Continued base rate compression — Fed cuts reducing floating rate income
  2. Lower market spreads — tighter credit spreads in leveraged lending
  3. Increasingly senior asset mix — safer loans but lower yields
Dividend ScenarioPer ShareAnnualizedYield at $8.15Yield at NAV
Current (Q1 2026)$0.32 $1.2815.7%11.1%
Future (Q2 2026+)$0.25 $1.00~12%~9%

Even at the reduced rate, the pro forma yield of ~12% at current prices remains attractive relative to BDC peers.

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What Is NMFC's Portfolio Quality?

Portfolio health remains strong with ~95% of investments rated Green on NMFC's internal heatmap.

Risk RatingCostFair Value% of PortfolioWeighted Avg Mark
Green$2,700M $2,611M 94.8% 98.6%
Yellow$85M $56M 2.0% 64.8%
Orange$157M $89M 3.2% 64.8%
Red$0 $0 0% —

The portfolio's senior orientation improved to ~80% (up from 75% as of December 31, 2024), reflecting management's focus on first-lien loans.

Portfolio Composition

Asset TypeFair Value% of Total
First Lien$1,818M 66.0%
Senior Loan Funds (SLP III/IV) & NMNLC$388M 14.1%
Second Lien$105M 3.8%
Subordinated$122M 4.4%
Preferred Equity$233M 8.4%
Common Equity & Other$91M 3.3%

How Did the Stock React?

NMFC shares rose +1.6% on the day of the announcement to $8.16, though the stock trades at a substantial 29% discount to NAV of $11.52.

MetricValue
Stock Price$8.16
NAV per Share$11.52
Discount to NAV29%
52-Week High$12.02
52-Week Low$7.91
Market Cap$842M
Annualized Yield15.7%

The wide discount to NAV explains management's enthusiasm for share buybacks — repurchasing stock at 71 cents on the dollar is immediately accretive to remaining shareholders.

What Changed From Last Quarter?

MetricQ4 2025Q3 2025Change
NAV per Share$11.52 $12.06 -4.5%
Portfolio Fair Value$2,756M $2,957M -6.8%
Statutory Debt/Equity1.26x 1.26x Flat
Senior Asset Mix~80% ~78%+2 ppts

Key changes this quarter:

  • NAV declined primarily due to unrealized markdowns on non-controlled/affiliated and controlled investments
  • Portfolio contracted from $2.96B to $2.76B through repayments and sales exceeding originations
  • Activity: $29.5M originations, $139.7M repayments, $55.2M sales
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Balance Sheet & Liquidity

NMFC maintains solid liquidity with $856 million in available borrowing capacity.

MetricDecember 31, 2025
Cash & Equivalents$81M
Total Assets$2,903M
Net Borrowings$1,671M
Total Net Assets$1,188M
Available Credit Capacity$856M
Weighted Avg YTM at Cost10.5%

Forward Catalysts

Q4 2025 Conference Call: February 25, 2026 at 11:30 AM ET

Key Events to Watch:

  1. Asset sale closing — $477M transaction execution and capital redeployment
  2. Q2 2026 dividend reset — transition to $0.25/share
  3. Continued buyback activity — management committed to repurchases in 2026
  4. Portfolio rotation — shift toward first-lien, lower PIK income

Key Takeaways

  1. NII covered the dividend at $0.32/share despite spread compression
  2. Strategic reset underway with $477M asset sale, fee cut, and dividend reduction
  3. Portfolio quality solid with 95% Green-rated and 80% senior mix
  4. Deep NAV discount makes buybacks highly accretive
  5. Yield compression ahead — dividend cut to $0.25 reflects lower rate environment

Conference call replay available through May 25, 2026: +1 (877) 344-7529, Access Code: 4464661