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Earn An 8% To 10% Balanced Portfolio Yield Investing In America: Part 1

Published Wed, 10 Jun 2020 12:13:12 -0400 on Seeking Alpha

This article is the beginning of a series that will walk investors through building a balanced portfolio using BDC stocks, preferred shares, baby bonds and notes.
BDCs currently have an average annual dividend yield of 12% and are required to invest 70% of assets in U.S. private companies diversified by size and sector.
BDC stocks are currently pulling back from recent highs and investors should consider their baby bonds and preferreds currently yielding 6.5% to 9%.
BDCs will begin reporting results next month and investors should be watching closely and ready for a wide range of "winners" and "losers."

Business Development Companies ("BDCs") were created by Congress in 1980 to give investors an opportunity to invest in private small- and mid-sized U.S. companies typically overlooked by banks. The following slide from ARCC breaks out many of the requirements of the BDC/RIC structure including 70% of assets in U.S. private companies diversified by size and sector.

Source: ARCC Investor Presentation
Most BDCs typically do not directly invest in travel, entertainment, retail, restaurants, sporting event-related, airlines, oil/energy, etc., and if they do it's a small portion of the portfolio. Also, most BDCs have been focused on "investing at the top of the capital structure in businesses with limited commodity and cyclical exposure." The following was provided by ARCC but is similar for most BDCs:


Source: ARCC Investor Presentation
One of the many reasons that I like BDCs is the non-bank structure that allows them to invest at multiple levels of the capital structure. This gives them a wide range of tools during volatile periods such as this so that they can support portfolio companies for the long term while providing significant upside potential for BDC shareholders.
All higher-quality BDCs have credit platforms that have been carefully building their portfolios with a potential recession in mind.... Read more

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
MONROE CAPITAL 10.48   18.4 0.57 1.40 13.60
CAPITALA FINANCE 8.19   0.0 -3.13 1.00 12.46
THL CREDIT 6.96   0.0 -0.86 0.84 12.09
PENNANTPARK INVESTMENT 6.32   21.8 0.29 0.72 11.32
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
APOLLO INVESTMENT 16.78   14.2 1.18 1.80 10.73
FIDUS INVESTMENT 14.84   8.8 1.69 1.56 10.53
HORIZON TECHNOLOGY FINANCE 11.85   9.5 1.25 1.20 10.12
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
PENNANTPARK FLOATING RATE CAPITAL 11.68   30.0 0.39 1.14 9.81
HERCULES TECH GROWTH CAP 13.26   10.0 1.32 1.28 9.55
GOLDMAN SACHS BDC 20.29   22.5 0.90 1.80 8.88
GLADSTONE CAPITAL 9.50   63.3 0.15 0.84 8.84
ARES CAPITAL 19.19   10.5 1.82 1.60 8.39
SOLAR SENIOR CAPITAL 17.32   18.8 0.92 1.41 8.17
NEWTEK BUSINESS SERVICES 22.91   0.0 0.00 2.32 8.09
OAKTREE STRATEGIC INCOME 8.10   19.8 0.41 0.62 7.51
CAPITAL SOUTHWEST 21.81   12.2 1.78 1.60 7.21
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):
Preliminary Q2 Results For The BDC Sector Currently Yielding 13%
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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