A lot of income-focused investors are attracted to BDCs for their large dividend yields. However, not all BDCs are created equally. In the following table you will see comparative data for top BDCs, including the percent of investments that have fixed-versus-floating rates, the percent of debt they have that is fixed-versus-floating rate, price-to-book value, current dividend yields and the percent of first lien loans they have made as investments.
Main Street Capital: 40 Big-Yield BDCs Compared
BDCs are often an income-investor favorite (thanks to their big growing dividends). And among BDCs, Main Street Capital (MAIN) has consistently been a top performer. However, investors frequently misunderstand Main Street’s fundamentals (i.e. they incorrectly believe price-to-book is too high and they forget to properly consider special dividends when considering the yield). In this report, we share data on 40+ big-yield BDCs, considering current price-to-book values (versus history), current market conditions (including how much credit spread risk is priced in) and the breakdown of historical returns (in terms of price gains versus dividend income). We conclude with out strong opinion about investing in BDCs in general and Main Street Capital in particular.
35 Big-Yield BDCs: Despite Climbing Risks, 3 Top Ideas Worth Considering
BDCs can be an excellent source of high income, but they are not the holy grail that some investors believe. The group faces mounting pressures as well as categorical drawbacks (that are often overlooked). In this report, we share updated data on over 35 big-yield BDCs, review our concerns with the group, highlight 3 top BDCs that standout as attractive, and then conclude with a few alternative high-income opportunities that are currently worth considering too.
Update: 40 Big-Yield BDCs, Silicon Valley Bank Warning
As mentioned in our previous note, BDCs are like banks, only riskier. Not only are BDCs facing increasing stress due to slowing economic growth and increasing interest rates (i.e. the tradeoff between higher floating rate interest payments received and higher default risk on loans), but some BDCs (such as those focused on venture capital) are dramatically over-exposed to fallout from the Silicon Valley Bank mess. In this note, we share updated data on 40 BDCs, and then dive deeper into 4 specific venture-capital-focused BDCs—and how we expect them to fare in light of the SVB mess—buyer beware!
BDCs: Financially Strong, Despite Deteriorating Market
Attractive 7.1% Yield BDC: Monthly Dividend, Compelling Valuation
The well-managed, blue-chip, Business Development Company (“BDC”) we review in this report currently trades at a compelling price, it offers a healthy dividend, and it sits at an attractive spot in the current business cycle. But is it worth investing? This report reviews all the details and then concludes with our opinion on investing.
Big-Dividend BDCs: The 5 We Own (Yielding 6.0%, 9.1%, 8.2%, 8.1% and 8.5%)
Business Development Companies, or “BDCs,” basically provide financing (debt and equity) to private companies that are usually a bit too risky for ordinary banks to work with (due especially to stringent post-financial crisis regulatory rules). However, by building a portfolio of these companies, BDCs can reduce risks, and pay income-focused investors the big dividend yields that they love. This report provides an overview of current BDC valuations, and then reviews five of our favorite BDCs, currently yielding 6.0%, 9.1%, 8.2%, 8.1% and 8.5%, respectively.
Main Street Capital: 6.3% Yield, Pandemic Challenges
Main Street Capital (MAIN) is a popular BDC (business development company) thanks to its big monthly dividend payments (which have never been reduced in the history of the company). Main Street provides financing solutions to a wide variety of smaller businesses—many of which were incidentally hit particularly hard by covid. The shares have not yet recovered to their pre-covid level, and in this report we review the business, the financials, the dividend, the risks and finally conclude with our opinion on investing.
New Options Trade: 2nd Wave Fear, Creates High Upfront Income Opportunity
As market narratives continue to focus on “second wave” coronavirus risks, stocks are selling off hard. We’d been enjoying a strengthening rebound up until last week, and this week is starting off down again. However, some businesses will be impacted less than others. This report shares an attractive upfront income-generating options trade on a business that will weather the storm thanks to its critical nature, strong cash position, long-term leases and the fact that it may benefit as many of its peers struggle. We believe this is an attractive trade to place today and potentially over the next several trading sessions, as long as the underlying stock price doesn’t move too dramatically before then.
New Options Trade: Very High Upfront Income, Another Bite at this BDC Apple
Some investors believe the market has rallied back too far, too quickly, and that we’re due for another significant pullback. And now with share prices starting to trade lower in recent sessions, fear is creeping back into investors’ minds. It is this fear and volatility that can increase the upfront premium income available in the options market, and give investors another chance to pick up attractive shares at lower prices. This report shares an income-generating options trade on a highly attractive long-term BDC investment. We believe it’s an attractive trade to place today potentially over the next few trading sessions, as long as the underlying stock price doesn’t move too dramatically before then.
Main Street Capital: Dividend Uncertain, Upside Clear
Income investors had grown to love Main Street Capital’s (MAIN) big, safe, monthly dividend so much that its share price had risen to a dramatic premium relative to its net asset value (“NAV”). Then the coronavirus hit. The share price plunged, once loved supplemental dividends have been suspended, and even the “sacred” regular dividend is now at risk. In this report, we analyze the company’s background, impacts of the coronavirus on its business, earnings power, the dividend, valuation and risks to understand whether now is the right time to establish or add to existing positions.
Main Street Capital: Attractive 6% Yield, But Know The Big Risks
Main Street Capital (MAIN) is a popular income-investor Business Development Company (“BDC”) because it offers an attractive 6% yield, and both the dividend payments and the security price have been increasing significantly for years. This article briefly reviews the company and its many attractive qualities, then gets into the big risk factors that investors should be aware of. We conclude with our views on whether MAIN is still an attractive security to own or if it’s time to look elsewhere.
100 High-Yield Stocks Down Big Last Week: These 10 Are Worth Considering
Market fear spiked on Friday (the VIX was up 28.5%), and the Dow Jones experienced its biggest weekly decline in over 2 years (-4.1%). Interestingly, many higher yielding stocks also sold off significantly, and this article highlights ten that we believe are attractive and worth considering, especially following the selloff.