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I Just Bought More TCG BDC, Which Is About To Rally With A Safe 13% Yield

Published Thu, 03 Jan 2019 09:11:14 -0500 on Seeking Alpha

I have recently been purchasing shares of higher-quality Business Development Companies ("BDCs") with risk-averse balance sheets prepared for a potential economic downturn and/or rising interest rates including TCG BDC Inc. (CGBD). High-yield investments and the overall financial sector have been declining since early September potentially for a few reasons, including investors expecting higher yields due to fears of an economic slowdown.
On Wednesday, a series of purchasing managers' indexes for December mostly showed declines or slowdowns in manufacturing activity including much of Europe and Asia as the U.S.-led trade war and a slowdown in demand hit production. U.S. activity was a bit slower, but still expanding, in a sign that China has suffered more from trade issues than the U.S.
It is important to note that BDCs mostly invest U.S. companies as they were created by Congress in 1980 "to fuel job growth and assist emerging U.S. businesses in raising funds". The following chart shows the recent performance for U.S. Financial Select Sector SPDR ETF (XLF) and UBS ETRACS Wells Fargo Business Development Company ETN (BDCS) that have declined around 13% to 14% over the last three months. However, both have started to rebound:

Source: Yahoo Finance
CGBD has declined more than the average BDC and I purchased shares yesterday at $12.34 for the reasons discussed in this article.

Source: Yahoo Finance
As shown below, CGBD has... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
THL CREDIT 6.61   0.0 -0.51 0.84 12.65
MONROE CAPITAL 11.19   19.3 0.58 1.40 12.41
APOLLO INVESTMENT 16.34   16.2 1.01 1.80 11.06
PROSPECT CAPITAL 6.67   11.1 0.60 0.72 10.86
HERCULES TECH GROWTH CAP 12.98   9.1 1.42 1.28 9.85
PENNANTPARK FLOATING RATE CAPITAL 11.64   29.1 0.40 1.14 9.80
FIDUS INVESTMENT 16.18   8.6 1.87 1.56 9.68
GOLDMAN SACHS BDC 19.80   21.3 0.93 1.80 9.08
ARES CAPITAL 18.16   9.3 1.95 1.60 8.82
MEDLEY CAPITAL 2.44   0.0 -1.55 0.20 8.06
GLADSTONE INVESTMENT 11.16   4.5 2.48 0.82 7.24
GOLUB CAPITAL BDC 17.81   14.6 1.22 1.28 7.12
MAIN STREET CAPITAL 41.95   14.5 2.89 2.46 5.81


Older articles featuring Thl Credit (TCRD):
Assessing Risk: Retirement Portfolio Using BDCs Yielding 10%+
Building A Retirement Portfolio With BDCs Currently Yielding 10.6%
10% Yielding New Mountain Finance Receives Fitch Rating
Dividend Increases For The High-Yield BDC Sector, Part 6: Gladstone Investment
Dividends By The Numbers For March 2019 And 2019-Q1
Apollo Investment: 12% Yield Supported By Improving Portfolio Quality
69 10%+ Dividend Yield WallStars Portend Ides Of March Fortunes
Dividend Increases For The High-Yield BDC Sector, Part 5: BlackRock TCP Capital
Strong Buy With 12% Yield With 30%+ Return Potential: TCG BDC
Dividend Increases For The High-Yield BDC Sector, Part 4: Main Street Capital