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Upcoming NAV Changes For The BDC Sector Yielding 14%

Published Sun, 12 Jul 2020 15:00:00 -0400 on Seeking Alpha

Seeking AlphaDividend IdeasUpcoming NAV Changes For The BDC Sector Yielding 14%Jul. 12, 2020 3:00 PM ET|| Includes: AINV, ARCC, CGBD, CSWC, FDUS, GAIN, GBDC, GLAD, GSBD, HTGC, MAIN, MRCC, MRCCL, NMFC, OCSL, ORCC, PFLT, PSEC, SUNS, TCPC, TCRD, TPVG, TSLXby: BDC BuzzBDC Buzz Sustainable DividendsBuild a portfolio with sustainable dividend yields ranging from 8% to 12%SummaryAs predicted, BDC pricing has pulled back a bit, driving an average yield of 14%.
However, I believe that BDC pricing could rally as BDCs report stronger-than-expected Q2 results (discussed below) in three weeks.
This article discusses one BDC that will likely not report favorable results partially due to issuing shares through its "ATM" program at prices 30% to 40% below NAV.
Quick BDC Market Update
As mentioned in previous articles, I was expecting Business Development Company ("BDC") pricing to pull back from the recent highs for various reasons including profit-taking and a partial return to "risk-off" mode. Please note that most BDC charts look similar to the one below with a peak on June 8 and then mostly down.

I am expecting volatility through July until BDCs start to report Q2 2020 results (see dates at the end). However, I am expecting many BDCs to report stronger-than-expected results including net asset value "NAV" increases, adequate dividend coverage, and reaffirming current dividends. Many of the NAV increases will be due to:
Tightening of yield spreads (will impact each BDC differently depending on loan mix) Likely improved valuations related to COVID-19 as many BDCs made large general write-downs due to the uncertainty of the impact as of March 31 PPP aid which reduced liquidity and leverage issues for many portfolio companies It is important to understand that the values BDC management applied to their assets on March 31, 2020, were conservative as we did understand which companies/sectors would be the most impacted. Of course, there will be some... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
MONROE CAPITAL 10.48   18.4 0.57 1.40 13.60
THL CREDIT 6.96   0.0 -0.86 0.84 12.09
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
TCP CAPITAL 13.75   29.3 0.47 1.44 10.48
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
CAPITAL SOUTHWEST 21.81   12.2 1.78 1.60 7.21
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


Older articles featuring Monroe Capital (MRCC):
62 10%+Yield Dividend Stocks Priced $5-15 For August Dog Days
Preliminary Q2 Results For The BDC Sector Currently Yielding 13%
69 10%+ Yield Dividend Dogs Priced $5-$15 For July
Dividends By The Numbers In June 2020 And 2020-Q2
Upcoming Rally For BDCs Currently Yielding 13%
The Worst May Be Behind Us For Coronavirus Recession Dividend Cuts
Earn An 8% To 10% Balanced Portfolio Yield Investing In America: Part 1
TCG: Why I Bought Carlyle Group's BDC Currently Yielding 21%
BDCs Continue To Affirm Dividends: Capital Southwest At 15%
Picking Winners And Losers In The 18% Yielding BDC Sector