Prospect Capital faces financial decline despite high yield and discount, with dividend cuts likely to continue.

Prospect Capital Corporation (PSEC) remains a sell due to ongoing financial deterioration, despite trading at a 59% discount to its net asset value and offering a double-digit yield. In Q3, the company reported declines in net investment income and total investment income, with its net asset value falling both sequentially and year-over-year, underperforming its peers. Although management's shift to first-lien loans and reduced real estate exposure are positive steps, they are unlikely to offset near-term financial weakness. Dividend coverage is weak, with a recent cut and the potential for further reductions, indicating high risk and limited upside for investors.