1 BDC And 1 MLP For 9% Non-Cyclical Retirement Income
The recent events in the market have made risk mitigation a relevant topic once again. This is especially important for investors, who want to maximize yield, while keeping the risks balanced (and income cut distant). In this article I have shared two picks, which offer close to 9% yields and the necessary fundamentals to deliver non-cyclical (de-risked) distributions.
BDC Weekly Review: A Mystery On The Horizon
We take a look at the action in business development companies through the first week of March and highlight some of the key themes we are watching. BDCs had a tough week despite a strong finish on the back of increased market volatility and worsening risk sentiment. Horizon Tech Finance delivered a negative 3.5% total NAV return in Q4, continuing its trend of underperformance, yet it trades at a premium.
Kayne Anderson BDC: Still A Hold, But Discount And Fundamentals Are Attractive For Income-Focused Investors
Kayne Anderson BDC, despite a short track record, shows strong fundamentals with high first-lien loan exposure and diversified borrower portfolio, making it a defensive investment. Latest earnings report shows a slight decline in net investment income and top line, but dividend coverage remains strong at 120%, outperforming peers. Economic uncertainty and lower base rates limit upside potential for BDCs, prompting a hold rating for Kayne Anderson BDC and others in the sector.
Golub Capital BDC's NAV, Valuation And Dividend Vs. 11 Peers - Part 1 (Includes Recommendations As Of 3/11/2025)
Part 1 of this article compares GBDC's recent quarterly change in NAV, quarterly and trailing 12-month economic return, NII, and current valuation to 11 BDC peers. Part 1 also performs a comparative analysis between each company's investment portfolio as of 9/30/2024 and 12/31/2024. This includes an updated percentage of investments on non-accrual status. I also provide a list of the other BDC stocks I currently believe are undervalued (a buy recommendation), overvalued (a sell recommendation), and appropriately valued (a hold recommendation).
The Moment Of Truth For BDC Dividend Investors Is Close
As a structural BDC bull I have to admit that the period of BDCs consistently surprising us on the upside has come to an end. Many lower quality BDCs have already cut their dividends to sync their cash flows with less favorable private credit lending environment. I would say that the moment of truth for high quality BDCs is also very close, where we will see how really durable their base dividends are.
Goldman Sachs BDC: Huge Dividend Yield, Yet Mediocre Overall Choice
Goldman Sachs BDC stock is in a long-term downtrend, trading near all-time lows, signaling fundamental issues despite its high dividend yield. Declining net investment income has led to a significant dividend cut, further diminishing GSBD's attractiveness. The clumsy approach management took in announcing an extra special dividend in order to push higher the total dividend yield does not seem a sustainable strategy.
Kayne Anderson BDC: Continuing To Show Its Potential For Growth
I maintain a buy rating on Kayne Anderson BDC due to its attractive financials, strong distribution coverage, and undervalued market price despite recent growth. KBDC's portfolio has grown impressively, with a fair value of $1.99B, and maintains a high starting dividend yield of 9.7%. The portfolio is well-structured with 98% first lien and 100% floating rate investments, providing both income generation and defensive measures.
BDC Weekly Review: JPMorgan Muscling In On Private Credit Turf
We take a look at the action in business development companies through the last week of February and highlight some of the key themes we are watching. BDCs remained flat amid volatile risk sentiment, with TCPC underperforming due to a poor quarter and dividend cut, while February saw slight overall gains for the sector. JPMorgan's $50bn direct lending initiative and merger of its commercial and investment banks could increase competition for BDCs in corporate lending.
Goldman Sachs BDC: Change In Dividend Structure Not A Deal-Changer
Goldman Sachs BDC has revised its dividend policy and fee structure, reducing the regular dividend but adding supplemental dividends to maintain overall payouts. Despite a 29% "cut" in the regular dividend, the BDC will pay supplemental dividends. The BDC's non-accrual percentage has decreased slightly in Q4'24, but the dividend safety margin has been reduced due to underperforming investments.
An Important Warning For BDC Investors
Why BDCs may be entering a dangerous phase. Avoid these risks before it's too late. One BDC stands out as a safe bet, and is my top pick right now.
Belden: More Upbeat On This Connection Player
Belden has improved its strategic focus and organic growth in 2024, making it a more attractive investment despite past execution issues. The company's revenues are split between Industrial Automation Solutions and Enterprise Solutions, with the former being both larger and more profitable. Despite a challenging time, Belden's debt reduction and strategic acquisitions position it well for future growth, even if an $8 earnings per share target is not met this year.
New Mountain Finance: Not The BDC For Me, Strong Sell
Adding Business Development Company assets post-Covid became crucial; I currently hold Ares Capital and Hercules Capital for their high yields and positive returns. New Mountain Finance specializes in defensive growth industries, but its EPS for 2024 is 30% less than in 2017. NMFC's dividends haven't grown over the past decade, and its Book Value has decreased, earning it a Strong Sell rating.
