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Dividend Increases For The High-Yield BDC Sector: Part 1

Published Tue, 05 Feb 2019 11:56:51 -0500 on Seeking Alpha

Business development companies, or BDCs, have begun reporting results and this article discusses some of the items that investors should be watching.

Sources: SEC Filings and bdcbuzz.com.
In December 2018, I purchased additional shares of multiple 'oversold' higher-quality BDCs with risk-averse balance sheets prepared for a potential economic slowdown. As investors jump back into financial stocks, the average BDC has easily outperformed the S&P 500 so far in 2019 but still have an average dividend yield of around 10.4%:

Sources: SEC Filings and bdcbuzz.com.
In the previous table, Medley Capital (MCC) is an outlier for many reasons, including being one of the worst-run BDCs of all time. The stock has been rallying on merger hopes. Please note that the RSI has recently spiked to 70 and is likely in overbought territory.

BDC Dividend Changes For 2019
As mentioned in many of my recent articles, there are a handful of BDCs that will likely cut dividends in 2019. However, there are also many more that will likely increase their current regular dividend and/or pay special dividends this year. This article discusses dividend coverage for Prospect Capital (PSEC), Oaktree Specialty Lending (OCSL), and PennantPark Investment (PNNT), all of which cut dividends in 2017/2018, as predicted in my previous articles:
"Oaktree Management Fees Driving Upcoming Dividend Cuts" mentioned "The reduced income and hurdle rate will result in much lower than... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
APOLLO INVESTMENT 15.72   18.5 0.85 1.80 11.52
MONROE CAPITAL 12.60   43.4 0.29 1.40 11.02
FIDUS INVESTMENT 15.52   7.7 2.02 1.56 10.14
HERCULES TECH GROWTH CAP 12.30   14.5 0.85 1.24 10.11
GLADSTONE CAPITAL 9.21   28.8 0.32 0.84 9.24
ARES CAPITAL 17.17   8.5 2.02 1.60 8.96
SOLAR SENIOR CAPITAL 17.10   20.1 0.85 1.41 8.26
GOLUB CAPITAL BDC 17.90   13.6 1.32 1.28 7.11
GLADSTONE INVESTMENT 11.84   3.8 3.09 0.82 6.96
MEDLEY CAPITAL 3.20   0.0 -1.63 0.20 6.21
MAIN STREET CAPITAL 38.44   13.7 2.81 2.40 6.17
PENNANTPARK FLOATING RATE CAPITAL 12.98   13.8 0.94 0.76 5.90
SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF 35.66   0.0 0.00 2.00 5.60
ISHARES IBOXX $ HIGH YIELD CORPORATE BOND FUND 85.78   0.0 0.00 4.56 5.31