Dividend-News

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Monroe Capital Offers 15% Yield Due To Portfolio Credit Issues

Published Wed, 26 Dec 2018 18:31:23 -0500 on Seeking Alpha

I have recently been purchasing shares of higher-quality Business Development Companies ("BDCs") with risk-averse balance sheets prepared for rising interest rates and/or a potential economic downturn. However, I have not purchased shares of Monroe Capital (MRCC) since 2016 for the reasons discussed in this article.
High-yield investments, including BDCs, have been declining since early September potentially for a few reasons including investors expecting higher yields and fear of an economic slowdown and/or higher interest rates. However, MRCC has declined more than the others and is now below its January/February 2016 lows (discussed next):

Source: Yahoo Finance
Quick BDC Market Update
The general markets have been declining for various reasons, some of which are related to BDCs (including a potential economic slowdown) but the underlying fundamentals of the U.S. economy and BDCs remain strong. In January/February 2016, the markets experienced similar concerns including slowing Chinese growth and increased energy sector defaults driving higher yield expectations especially for non-investment grade debt as shown in the chart below. Please see “Junk bonds suffer a rare negative return in January”. This also resulted in wider interest rate spreads and favorable lending conditions. Higher quality BDCs typically have much higher portfolio growth during these periods as they take advantage of higher market yields.

Source: FRED
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
BLACKROCK KELSO CAPITAL 5.25   0.0 -0.12 0.56 13.61
GARRISON CAPITAL 6.94   0.0 -0.17 0.92 13.35
CAPITALA FINANCE 8.19   0.0 -3.13 1.00 12.46
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
APOLLO INVESTMENT 16.78   14.2 1.18 1.80 10.73
ARES CAPITAL 19.19   10.5 1.82 1.60 8.39
GOLUB CAPITAL BDC 18.55   15.7 1.18 1.28 6.89
GLADSTONE INVESTMENT 12.34   7.4 1.67 0.82 6.73
MAIN STREET CAPITAL 43.18   16.8 2.57 2.46 5.69

BLACKROCK KELSO CAPITAL - BKCC
BLACKROCK KELSO CAPITAL - BKCC  


Older articles featuring Blackrock Kelso Capital (BKCC):
Earn An 8% To 10% Balanced Portfolio Yield Investing In America: Part 1
Quick BDC Market Update: 18% Average Yield But Continued Volatility
Why Investors Are Selling 12% Yielding Monroe Capital
Juul Investor BlackRock TCP Capital Currently Yielding 10.3%
Building A Retirement Portfolio With 6% To 9% Yield: Apollo Investment
Building A Retirement Portfolio With 6% To 9% Yield: Part 5
Building A Retirement Portfolio With 6% To 9% Yield: Part 4
Building A Retirement Portfolio With 6% To 9% Yield: Part 2
Building A Retirement Portfolio With 6% To 9% Yield: Part 1
BIZD: Attractive 9% Yield, But Widening Credit Spreads A Risk

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