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Sector Pullback Drives 10.3% Yield For This Defensively Positioned BDC

Published Thu, 01 Nov 2018 08:38:45 -0400 on Seeking Alpha

Business Development Company ("BDCs") have been pulling back for the reasons discussed last week in "BDC Sector Volatility Driving 10.5% Average Yield". As mentioned in the article, the recent declines in BDC stock prices has not been driven by fundamentals especially as high-yield default rates continue to decline as mentioned this morning in "Corporate debt levels and default rates diverge". I am expecting a rally in BDC pricing later this quarter and likely through Q1 2019.
As shown below, New Mountain Finance (NMFC) has recently hit prices close to where it was during the previous pullback this year as discussed "NMFC: Is This 10.5% Yielding BDC Ready To Rally?" and is likely oversold again. As shown below, I have recently purchased additional shares for the reasons discussed in this article including:
Insider purchases at higher prices Increased dividend coverage through recent portfolio growth and higher use of leverage in the coming quarters Defensively positioned portfolio for later stage cycle concerns Strong credit quality and NAV per share stability Being oversold along with the entire sector (discussed at the end)
Recent NMFC Insider Purchases Last month, management was purchasing additional shares at higher prices of $13.70 to $13.77 and there is a chance that insiders will purchase additional shares after the current "blackout period" which will be after the company reports results on November 7, 2018... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
FS INVESTMENT 5.85   0.0 -0.07 0.76 13.13
THL CREDIT 6.67   0.0 -0.51 0.84 12.63
MONROE CAPITAL 12.15   21.0 0.58 1.40 11.56
APOLLO INVESTMENT 16.03   15.9 1.01 1.80 11.26
PENNANTPARK INVESTMENT 6.63   14.7 0.45 0.72 10.88
PROSPECT CAPITAL 6.76   11.3 0.60 0.72 10.54
TCP CAPITAL 14.52   20.2 0.72 1.44 9.84
HERCULES TECH GROWTH CAP 13.24   9.3 1.42 1.28 9.60
PENNANTPARK FLOATING RATE CAPITAL 11.94   29.8 0.40 1.14 9.40
GOLDMAN SACHS BDC 19.74   21.2 0.93 1.80 9.05
ARES CAPITAL 17.88   9.2 1.95 0.16 8.97
GLADSTONE CAPITAL 9.33   31.1 0.30 0.84 8.96
SOLAR SENIOR CAPITAL 16.61   17.1 0.97 1.41 8.33
NEWTEK BUSINESS SERVICES 21.83   0.0 0.00 1.84 7.26
GOLUB CAPITAL BDC 17.78   14.6 1.22 1.28 7.20
MEDLEY CAPITAL 2.82   0.0 -1.55 0.20 7.12
GLADSTONE INVESTMENT 11.67   4.7 2.48 0.82 7.03
MAIN STREET CAPITAL 40.65   14.1 2.89 2.40 5.86