Tag: BDCs

Investing in Income: High-Yield BDC Stocks to Watch

by Fred Fuld III

Business Development Companies (BDCs) are unique investment vehicles designed to support small and mid-sized businesses by providing them with capital. These firms typically operate similarly to private equity funds, investing in a range of companies at various stages of development.

The primary aim of BDCs is to generate income for their shareholders, which they do primarily through dividend payouts. Given their structure and regulatory requirements, BDCs must distribute at least 90% of their taxable income to shareholders, making them attractive options for income-seeking investors. Here, we explore some of the top BDC stocks based on their dividend yields: TriplePoint Venture Growth BDC (TPVG), TCP Capital Corp. (TCPC), OFS Capital Corporation (OFS), and Runway Growth Finance Corp. (RWAY).

TriplePoint Venture Growth BDC (TPVG) has established itself as a prominent player in the BDC sector, focusing on providing financing solutions to venture capital-backed companies. As of recent financial reports, TPVG has demonstrated robust growth, driven by its strategic investments in high-growth sectors.

The company’s quarterly dividend is competitive, with a current yield hovering around 17%, including bonus dividends. Recent financial results indicate that TPVG’s net investment income has been on the rise, reflecting its effective portfolio management and the strong performance of its underlying investments. Earnings per share grew 57% year over year. The stock is trading at 78% of book value, however, it has a very low market capitalization of $274 million.

With its commitment to supporting innovative businesses, TPVG is well-positioned to continue generating substantial returns for its investors.

TCP Capital Corp. (TCPC), with a market cap of $695 million, is another noteworthy BDC, known for its focus on investing in middle-market companies. The firm has been successful in maintaining a consistent dividend payout, currently offering a trailing yield of approximately 16.75%%, which includes extra dividends. Recent earnings reports highlighted TCP’s solid credit quality and prudent investment strategy, which have contributed to a stable income stream. The stock is trading at 80% of book value.

Furthermore, the company has been actively managing its portfolio to mitigate risks associated with economic fluctuations. TCP’s commitment to its shareholders is evident through its history of regular dividend increases, making it an appealing choice for those looking for reliable income.

OFS Capital Corporation (OFS) specializes in providing debt and equity financing to small and mid-sized businesses, particularly in the United States. With a current dividend yield nearing 16.6%, OFS stands out for its consistent payout history and focus on credit quality. Recent financial disclosures revealed that OFS has maintained a healthy balance sheet, with a diversified investment portfolio that mitigates risk while capturing growth opportunities. The stock is selling for 71% of book value.

The company’s proactive approach to portfolio management and its emphasis on generating stable income make it an attractive option for dividend-focused investors. However, the company has a market cap of only $110 million, which is extremely low and should be considered very speculative.

Runway Growth Finance Corp. (RWAY) rounds out our list, catering to growth-stage companies in technology and other high-growth sectors. It has a fairly low market cap of $395 million.

RWAY offers an appealing dividend yield of around 15.6%, backed by its strategic investments in innovative firms poised for expansion. Recent financial performance shows that Runway has successfully navigated market challenges, maintaining a solid net investment income and a diverse portfolio. The price to book ratio is 0.78.

Runway’s focus on sustainable growth and consistent dividend payouts makes it a valuable addition to any income-seeking investor’s portfolio.

In conclusion, BDCs like TriplePoint Venture Growth BDC, TCP Capital Corp., OFS Capital Corporation, and Runway Growth Finance Corp. offer investors attractive dividend yields while supporting the growth of small and mid-sized businesses. As always, potential investors should conduct thorough research and consider market conditions before investing.

Disclosure: Author didn’t own any fo the above at the time the article was written.

Monthly Dividend Business Development Companies Paying Over 9%

by Fred Fuld III

A business development company (BDC) is a type of financial institution that specializes in providing financing to small and medium-sized businesses (SMBs). They do this by raising capital from investors, typically through issuing stocks or bonds, and then using that money to make loans or investments in private companies.

Here are some key things to know about BDCs:

  • Focus on SMBs: BDCs primarily focus on providing financing to SMBs that may not be able to easily access traditional bank loans or other forms of debt. This could be due to a variety of factors, such as the company’s size, stage of development, or credit history.
  • Debt and equity investments: BDCs can make both debt and equity investments in companies. Debt investments typically involve providing a loan to the company, while equity investments involve buying a ownership stake in the company.
  • High yields: BDCs are known for offering high dividend yields to their investors. This is because they are required to distribute 90% of their taxable income to shareholders each year. However, it is important to note that BDC investments are also considered relatively risky.
  • Publicly traded: Many BDCs are publicly traded companies, which means that their shares can be bought and sold on stock exchanges. This makes them more accessible to a wider range of investors than private equity funds or venture capital firms.

BDCs play an important role in the economy by providing financing to growing businesses that may not be able to obtain it from traditional lenders. This can help to create jobs and boost economic growth.

The following BDCs pay dividend yields of more than 9% and pay their dividends monthly:

Horizon Technology Finance (HRZN), which has a yield of 9.71%.

Horizon Technology Finance Corporation, established in 2003 and headquartered in Farmington, Connecticut, is a specialty finance company with a focus on providing capital and financing solutions to venture capital and private equity-backed companies. The industries targeted by Horizon Technology Finance include technology, life sciences, healthcare information and services, and sustainability.

The company’s core services revolve around venture debt financing, offering loans to support the growth and development of technology and life sciences companies. In addition to debt financing, Horizon Technology Finance may engage in equity investments, participating alongside its debt offerings. The company actively manages a portfolio of investments in various stages, ranging from early-stage to expansion-stage and late-stage companies.

Pennant Park Floating Rate Capital (PFLT) yields 9.75%.

PennantPark Floating Rate Capital Ltd. is a specialty finance company that operates as a closed-end, non-diversified investment company. It is publicly traded and focuses on providing customized financing solutions primarily to middle-market companies. The company’s investment strategy centers around investing in floating rate loans and other investments in the form of senior secured loans, mezzanine debt, and equity investments.

Headquartered in New York, PennantPark Floating Rate Capital seeks to generate current income while preserving capital through its investment activities. As of my last knowledge update in January 2022, the company primarily targets companies operating in various industries, including healthcare, industrial manufacturing, automotive, technology, energy, and other sectors.

PennantPark Floating Rate Capital’s portfolio is diversified across multiple industries and consists of investments in debt and equity securities. The focus on floating rate loans provides the company with the potential for income generation in a rising interest rate environment.

The company is managed by PennantPark Investment Advisers, LLC, a registered investment adviser with expertise in credit and private equity markets. The management team is responsible for implementing the company’s investment strategy and making decisions aimed at optimizing returns for shareholders.

Prospect Capital (PSEC) pays an extremely high yield of 11.63%.

Prospect Capital Corporation is a business development company (BDC) that operates as a closed-end investment company. Headquartered in New York City, the company specializes in providing financing solutions to middle-market companies across various industries. As a BDC, Prospect Capital is focused on supporting the growth and expansion of its portfolio companies through a range of financial instruments.

The investment strategy of Prospect Capital involves deploying capital in a diversified manner, including senior and subordinated debt, as well as equity investments. The company typically targets companies with strong management teams and growth potential, often in need of capital for acquisitions, recapitalizations, or other corporate purposes.

Prospect Capital’s investment portfolio spans a wide array of industries, including but not limited to energy, manufacturing, healthcare, technology, and consumer services. The goal is to build a diversified portfolio that mitigates risk while generating income and potential capital appreciation for shareholders.

Disclosure: Author didn’t own any of the above at the time the article was written.

10 BDC Stocks Paying Dividends Over 8%

by Fred Fuld III

If you have not heard of BDCs, they may6 be worth a look. BDC stands for Business Development Company.

BDCs are closed-end investment funds that invest in small and mid-sized businesses, either through equity investments, debt, or both.

They avoid double taxation, similar to REITs, as long as at least 90% of earnings are distributed to shareholders. There is no taxation at the corporate level.

Many income investors like to invest in BDCs for their income, with dividend yields as high as 11%.

One example of a high income BDC is Ares Capital  (ARCC), a Los Angeles based company that offers a yield of 8.8%. This BDC has a market cap of $10 billion and pays its dividend quarterly.

Another high yield BDC is Golub Capital BDC (GBDC), which pays a yield of 8.76%. It also has a quarterly dividend payment schedule. This New York City based company has a market cap of $2.4 billion.

There are actually ten BDCs that yield over 8%, with one yielding 11%. In addition, three of the stocks pay dividends monthly.

The entire list of 10 BDC stocks paying over 8% will be emailed to all subscribers this weekend, on Saturday, August 13, 2022. If you are not a subscriber, you can sign up at the signup box below. Don’t miss out. Remember, it’s free!

Of course, there is aways risk, especially since the BDCs invest in smaller companies.

Don’t forget to check out: 

Stocks going ex-dividend in August

REITs Paying over 10%

Disclosure: Author didn’t own any of the above at the time the article was written.