Published Tue, 24 Jul 2018 14:29:08 -0400 on Seeking Alpha
Main Thesis In this article, we will review the VanEck Vectors BDC Income ETF (BIZD). With a composition of high-yield equities, this ETF can indeed offer prospective investors strong equity income. With a portfolio of common stocks that offer floating rate loans to private middle market companies, BIZD has realized the benefits of rising short-term rates. Notwithstanding this and the fact that the ETF has the distributions well covered, I cannot recommend holding BIZD as a core equity income holding because high fees have effectively eroded capital growth for investors. As an alternative asset class, this BDC fund can best be used as a supplement to deliver yield in the right circumstances.
Assessment of distribution
(Source: Original Image - Data from Yahoo Finance)
For an unlevered fund made up of a portfolio of equities, a trailing 12-month yield of 8.48% is very impressive. Furthermore, you can see from the chart above that the ETF has delivered on its value proposition. Since inception, the quarterly distribution has been trending upwards as short-term rates have risen. Of course, as it is made up of high-yield equities, not only should total return be considered, but is the distribution sustainable?
(Source: Fund Factsheet)
The BDC business model: Provide floating rate loans to private middle market companies. Despite the fact that these loans are typically secured with property, the average credit rating for the borrowers are... Read more
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