Sixth Street Specialty Lending, Inc. (TSLX)

Sixth Street Lending remains a buy for income investors despite recent net investment income and portfolio contraction. TSLX maintains strong dividend coverage, outperforming BDC peers like ARCC and OBDC, with 108.2% coverage in Q4 and 89% first lien exposure. Shares trade at a 1.07X price-to-NAV ratio, below the three-year average, reflecting sector repricing and market concerns over software loan exposure.

System-wide BDC dividend cuts are highly likely as base dividend coverage averages 99% and growth is constrained. As a result, many BDC investors have decided to sit on the sidelines until the expected dividend cuts materialize. The idea is that a cut will lead to a negative share price reaction and thus provide a better opportunity to buy at a bargain price.

Shares of Sixth Street Specialty Lending, Inc. (NYSE: TSLX - Get Free Report) reached a new 52-week low during mid-day trading on Monday after Weiss Ratings downgraded the stock from a buy (b-) rating to a hold (c+) rating. The stock traded as low as $17.91 and last traded at $17.9830, with a volume of 416912

Sixth Street Specialty Lending is a differentiated BDC focused on complex, senior secured lending, with strong underwriting and high portfolio yields. TSLX maintains a stable, well-covered dividend, supported by spillover income and prudent risk management, despite sector headwinds and anticipated rate cuts. Approximately 40% of TSLX's portfolio is exposed to software, a sector facing scrutiny, but mitigated by conservative LTVs and management's expertise.

Sixth Street Specialty Lending is paying out a 9.6% base dividend yield that was 115% covered by net investment income in its fourth quarter. The BDC is currently swapping hands at a 13.25% premium to NAV per share of $16.98. This dipped by $0.16 per share sequentially. Nonaccruals came in at 0.6% of TSLX's investment portfolio at fair value, with net funded investment activity negative at $302 million for 2025.

The past couple of months have provided a solid ground for the TSLX bears to claim victory. The fact that the BDC dropped by almost 5% on the day when the earnings got released easily adds fuel to the discussion of TSLX's demise. Yet, we have to distinguish between valuation contraction and fundamental weakness.

Caprock Group LLC bought a new position in shares of Sixth Street Specialty Lending, Inc. (NYSE: TSLX) during the third quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor bought 60,323 shares of the financial services provider's stock, valued at approximately $1,478,000. Caprock

Sixth Street Specialty Lending, Inc. (TSLX) Q4 2025 Earnings Call Transcript

While the top- and bottom-line numbers for Sixth St (TSLX) give a sense of how the business performed in the quarter ended December 2025, it could be worth looking at how some of its key metrics compare to Wall Street estimates and year-ago values.

Sixth Street (TSLX) came out with quarterly earnings of $0.52 per share, beating the Zacks Consensus Estimate of $0.5 per share. This compares to earnings of $0.61 per share a year ago.

NEW YORK--(BUSINESS WIRE)--Sixth Street Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported financial results for the full year and fourth quarter ended December 31, 2025. Please view a printable version of the 2025 Full Year and Fourth Quarter Results. Conference Call Information: A conference call to discuss the Company's financial results will be held at 8:30 a.m. Eastern Time on February 13, 2026. The conference call will be broadcast live in listen-only mode on the Invest.

Software stocks are down sharply, but loan pricing has barely moved—leaving Morgan Stanley cautious, with BDCs the most exposed.

2 BDC Value Creators For Durable NAV And High Income

The market is pricing in a crisis that the data simply does not show. A misunderstood corner of credit is flashing rare value signals. The disconnect between headlines and fundamentals is growing fast.

The BDC sector is slowly rebounding, but still faces looming dividend cuts as NII per share declines with lower base rates and spread compression. Average BDC base dividend coverage is 100%, and debt-to-equity is 1.22x, leaving little margin for sustaining current payouts without asset sales or leverage. Dividend cuts of 15-20% are likely sector-wide but remain acceptable given prevailing yields (as long as non-accruals do not get involved).

Sixth Street Lending offers robust dividend income, superior portfolio quality, and outperformance versus BDC rivals since its 2014 IPO. TSLX maintains 106% dividend coverage, has a low 0.6% non-accrual percentage, and 89% first lien exposure, supporting resilience in a lower-rate environment. TSLX is moving slightly more funds into higher-risk, higher-yielding structured credit investments to boost its income prospects and diversify its portfolio.