2 BDCs To Sell Before They Announce Dividend Cuts
Private credit and BDC sectors have faced steep losses, with the BDC index down nearly 15% YTD, worse than the S&P 500. Economic uncertainties, stagnant M&A/LBO markets, potential Fed rate cuts negatively impact BDCs, especially those with weak margin of safety. In the article I discuss two BDCs, which are, in my view, about to cut their dividends this year.
Chicago Atlantic BDC: Capturing The Growth Of Cannabis
Chicago Atlantic BDC (LIEN) is a business development company focused on debt investments, primarily in the cannabis sector, offering a 12.7% dividend yield. LIEN's portfolio is concentrated, with 77% in cannabis businesses, but management is diversifying into non-cannabis sectors to mitigate regulatory risks. Despite trading at a 19% discount to NAV, LIEN shows strong fundamentals, growing net investment income, and no non-accruals, but faces rising PIK income.
BDC Weekly Review: CGBD Completes Its Merger
We take a look at the action in business development companies through the last week of March and highlight some of the key themes we are watching. BDCs finished flat for the week with MAIN and HTGC underperforming; sector valuation remains slightly above historic averages and down 7% from the recent peak. Carlyle Secured Lending's merger with CSL III closed, potentially pushing CGBD prices lower; CGBD is down 3.5% YTD, slightly expensive, but worth watching.
Volatile Times But Stable Retirement Income: 1 BDC And 1 REIT To Buy
My core strategy focuses on high-quality, durable income streams, which are now benefiting from the current market conditions favoring value/income-based investing. Income investors may finally outperform growth-tilted indices due to macro-level factors muting growth expectations and emphasizing quality and defense. Yet, we have to still be careful of not falling into value traps and securities that have a thin margin of safety on their dividend fronts.
Barings BDC: Adding To This 12.9%-Yielding BDC On The Dip
We take a look at the Q4 numbers from the Barings BDC. Barings BDC trades at a 15% discount to book, offers a 12.9% total dividend yield, and has a stable NAV over the last few years. Net investment income fell slightly over the quarter; base dividend coverage remains strong at 108%.
Stellus Capital: Time To Ditch This BDC (Downgrade)
Dividend Cut Likely – In my opinion, SCM risks a dividend cut as NII fell below its $0.40 payout, with a 100%+ payout ratio raising sustainability concerns. Rising Credit Issues – SCM's credit quality declined, with non-accruals rising to 5.4% in 2024, causing a 19% NII drop and $15.7M in losses. Overvalued vs. Peers – Despite the risks, SCM trades at a premium on NAV & NII multiples; sell recommended.
Nuveen Churchill Direct Lending: Underrated BDC, But Could Face Selling Pressure
Nuveen Churchill Direct Lending delivered a solid performance in 2024, growing both net and total investment income year-over-year despite a slight decline in the bottom line per share. NCDL's portfolio saw significant growth with $950 million deployed, focusing on first-lien investments and maintaining strong credit quality with minimal non-accruals. Despite a slight increase in leverage, NCDL's balance sheet remains robust, with no near-term debt maturities, strong liquidity, and strategic share repurchases.
How To Navigate BDC Investing In Lower Interest Rate Environment
Lower interest rates negatively impact BDCs' net investment income due to the floating rate nature of their loans tied to the Fed Funds rate. A typical BDC portfolio, with a debt to equity ratio of 1.0x, cannot fully offset lower rates through floating leverage. However, there are some ways to manage this situation.
Golub Capital BDC: Disappointing Performance, Not As Bad As It Seems (Rating Downgrade)
Due to economic uncertainty and a disappointing quarter, I am downgrading Golub Capital BDC from a buy to a hold. Despite misses in the top and bottom lines, GBDC's credit rating upgrade and higher originations are positive signs for future performance. Management expects improved net investment income from higher originations and restructured borrowers, but economic volatility remains a risk.
Chicago Atlantic BDC Inc. (LIEN) Q4 Earnings Call Transcript
Chicago Atlantic BDC, Inc. (NASDAQ:LIEN ) Q4 Earnings Conference Call March 31, 2025 8:30 AM ET Company Participants Tripp Sullivan - IR SCR Partners Peter Sack - Chief Executive Officer Martin Rodgers - Chief Financial Officer Dino Colonna - President Conference Call Participants Pablo Zuwanich - Zuwanich Associates Operator Good morning, and welcome to the Chicago Atlantic BDC Fourth Quarter 2024 Conference Call. All participants will be in listen-only mode.
Worried About BDC Dividends? Consider These 3 For Durable Income
BDC dividend investors, who want to avoid seeing their portfolio current income streams shrink have to be extra careful when picking BDCs. Largely due to unfavorable sector-wide conditions, many BDCs have already cut their dividends (just as I predicted). In my view, there are many more in line.
BDC Weekly Review: PSEC Gets More Bad Press
We take a look at the action in business development companies through the third week of March and highlight some of the key themes we are watching. BDCs saw a 2% total return this week, but March is shaping up to be the worst month since late 2023. A recent Bloomberg article discussed PSEC culture and outsider status.
