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High Yield: Sifting Through The Wreckage

Published Fri, 20 Mar 2020 17:17:56 -0400 on Seeking Alpha

The high-yield market has plummeted in recent weeks. This article assesses the damage, and sifts the wreckage for opportunities, particularly among Bond CEFs, BDCs and high yield REITs.
There will be bankruptcies and dividend cuts, but there are also exceptional opportunities.
The Fed is working to boost the value of specific Bond CEFs, certain BDCs have unique advantages, and there will be big winners (and losers) in the REIT space.
We conclude this article with our opinions and three strong buys.
High-Yield investments have been terrible over the last month. From Bond Closed-End Funds (CEFs) to Business Development Companies (BDCs) and Real Estate Investment Trusts (REITs), the carnage has been extreme. Many will not recover (there will be bankruptcies and dividend cuts). However, others will experience swift and powerful rebounds. This article surveys the damage, focusing on BDCs, Bond CEFs and REITs, and also shares three specific "Strong Buy" opportunities.
For a little perspective, before we get into the specifics of BDCs, Bond CEFs and High-Yield REITS, it's worth considering where we are in terms of the high-yield market. As you can see in the following chart, bond credit spreads have widened, BDC prices have plummeted and yields among REITs have risen, as we wait for more clarity (corporate earnings updates and Fed repo-market activity) on the fallout from this turmoil.

As you can see in the chart above, credit spreads (the difference in yield between risky bonds versus essentially US treasuries) have blown out, BDC prices (UBS ETRACS (BDCS)) have plummeted, and REIT yields have been mathematically driven higher as prices have fallen. For a little more perspective, here is what happened to credit spreads during the energy market distress of late 2015/early 2016, the financial crises (SPY) (2008-2009) and the tech bubble (QQQ) bursting (the early 2000's). As you can see from the current credit spread magnitude, things are getting... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
GEO GROUP 18.35   14.1 1.30 1.92 10.56
SARATOGA INVESTMENT 24.98   8.4 2.97 2.24 8.59
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
POWERSHARES QQQ TRUST SERIES 1 193.23   0.0 0.00 1.49 0.78


Older articles featuring Geo Group (GEO):
Forget FAANG: 5 Top Big Dividends Worth Considering
March 2020 Dividend Portfolio Update: A Month To Remember
The GEO Group Declares Quarterly Cash Dividend of $0.48 Per Share
February 2020 Dividend Portfolio Update
Dividend Champions For March 2020
5 High-Yielding REIT Sectors, Four To Own And One To Avoid
Dividend Challenger Highlights: Week Of February 9
January 2020 Dividend Portfolio Update
Dividend Challenger Highlights: Week Of February 9
The GEO Group Declares Quarterly Cash Dividend of $0.48 Per Share