The Dividend Growth Trifecta—quality, yield, and growth—remains my core focus for portfolio construction in an expensive market. Industry leaders like Ares Management Corporation and Blackstone Inc. offer superior risk-adjusted returns; I prefer buying dips in top names over chasing value in lower-quality peers. Schwab U.S. Dividend Equity ETF™ is off my buy list due to sector reconstitution and dimmed double-digit dividend growth prospects, despite holding a large position.
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Runway Growth Finance Corp. offers baby bond RWAYL with a yield to maturity above 7.8%, making it a standout in the BDC sector. RWAYL trades near par, offers quarterly interest, and has a maturity in July 2027. RWAY maintains a strong asset coverage ratio of 201.8% and a low non-accrual loan rate, supporting RWAYL's risk-return profile.
Gladstone Investment offers high-yield baby bonds with low duration, making them attractive for yield-focused investors seeking moderate risk. GAIN's portfolio is unique among BDCs, with 30% in preferred shares and a concentrated set of 25 investments, increasing both return and risk. We favor GAIN's baby bonds (GAINI, GAINZ) over common stock due to their stable yields (7.07–7.79%).
Eagle Point Income Co. recently reduced its monthly dividend by 35%, causing price volatility and investor anxiety about income safety. Despite the dividend cut, I believe the move reflects responsible management, prioritizing NAV preservation over unsustainable payouts. The fund's focus on CLO debt tranches and a leverage ratio of 30.66% support the safety of its 8.0% Series C Term Preferred Stock.
Trinity Capital's baby bonds, TRINI and TRINZ, offer stable yields above 7% with low durations, appealing for yield-focused investors. TRIN maintains investment-grade ratings, strong asset coverage, and a low non-accrual loan ratio, supporting its creditworthiness. Both baby bonds trade near par, with yields to the worst of 7.01% (TRINI) and 7.04% (TRINZ), and maturities under 5 years.
GECC stands out in the BDC sector for its resilience and stable yields, even as peers face pressure and value declines. The company's baby bonds, GECCI and GECCH, offer yields above 8%. While GECC's leverage and non-accrual rates are higher than sector leaders, its portfolio is largely secured and has no secured debt, benefiting bondholders.
Business development companies (BDCs) remain attractive for short-term, high-yield investments despite challenging market conditions. Established BDCs have demonstrated resilience, maintaining value while delivering appealing risk-reward profiles. Market volatility has impacted many BDCs, but top players continue to offer strong income opportunities.
Great Elm Capital Corporation's baby bonds offer nearly 9% yields, making them attractive for investors seeking high returns from short-duration, exchange-traded BDC bonds. Despite being one of the smallest BDCs with high leverage and a mixed portfolio, GECC has shown recent stability and resilience versus peers. Risks include a higher-than-average non-accrual loan rate and weaker asset coverage, but strengths include no secured debt and improving performance.
Runway Growth Finance stands out for its solid asset coverage, attractive discount, and strong baby bond yields near 8%. RWAYZ baby bond offers a yield to worst of nearly 8%, making it a compelling buy for investors seeking low-duration, high-yield opportunities. GLADZ is a strong sell due to its low yield to call; I recommend switching to RWAYZ for better risk-adjusted returns.
Gladstone Investment stands out among BDCs for its stability and attractive risk-adjusted yields, especially after the recent sector downturn. GAIN's baby bonds, particularly GAINZ and GAINI, offer compelling yields to maturity near 8% with low duration and credible credit ratings. Moody's-style analysis shows GAIN's fundamentals are solid, with strong profitability, reasonable leverage, and a Baa3-equivalent credit score.