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|
|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|
|SOLAR SENIOR CAPITAL||17.32||18.8||0.92||1.41||8.17|
|GOLUB CAPITAL BDC||18.55||15.7||1.18||1.28||6.89|
|MAIN STREET CAPITAL||43.18||16.8||2.57||2.46||5.69|
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