OFS Capital Reports Strong Q4 2025 Results Amid Energy and Defense Sector Resilience

OFS Capital (OFS) delivered a solid fourth quarter, reporting adjusted net investment income of $0.48 per share, surpassing analyst expectations. The results reflect strong portfolio performance, particularly in energy and defense-related private credit investments, which contributed 68% of the company’s total investment income during the quarter. Total investment income rose 11% year-over-year to $64.2 million, supported by a 5.3% weighted average yield on investments, up from 5.1% in the prior-year period. The company’s portfolio quality remained resilient, with non-accruals declining to 1.2% of total investments, down from 1.8% in Q4 2024. OFS attributed this improvement to disciplined underwriting and active portfolio management, particularly in midstream energy assets and U.S. defense contractors. The company’s exposure to energy infrastructure, including natural gas pipelines and LNG projects, helped absorb volatility, even as crude oil prices fluctuated around $78 per barrel (CL=F), with demand in industrial and export sectors remaining firm. OFS also announced a quarterly dividend of $0.45 per share, representing a 4% increase from the previous quarter and maintaining its 12-month payout ratio of 79% of adjusted NII. The company’s total assets under management reached $3.1 billion, with $1.7 billion allocated to energy and defense-related projects, up from $1.5 billion a year earlier. This growth aligns with broader trends in private credit, where infrastructure-backed deals are gaining favor amid rising interest rates. The results bolster investor confidence in BDCs with sector-specific exposure, especially those tied to energy stability and national security. OFS’s performance stands out in a market where many private credit firms are adjusting risk profiles amid macro uncertainty. The stock, trading at a premium to book value, reflects market optimism on continued dividend sustainability and sector strength.