3 Pillars To Minimize BDC Dividend Cut Risk In Your Portfolio
It is very likely that for most BDCs, the earnings have peaked and the direction of travel is unfavorable. There are both structural and transitory headwinds that put a pressure on earnings, rendering the dividend coverage levels potentially unsustainable. In this article, I share three pillars that have to be in place in BDC dividend investor portfolio to mitigate the risk of experiencing a cut in their income streams.
Barings BDC: Valuation Re-Rating Driven By Decent Performance
We take a look at the Q2 numbers from Barings BDC. The stock trades at a 12% discount to book and a 10.4% dividend yield. The company's portfolio quality remains fairly strong, with low non-accruals and modest net realized losses.
BDC Weekly Review: Lenders Are Taking Over Pluralsight
We take a look at the action in business development companies through the last week of August and highlight some of the key themes we are watching. BDCs saw a 1% total return last week but ended August down 2%; six of our eight holdings were top performers. Private lenders, including major BDCs, are injecting $275m into Pluralsight, converting existing debt to equity.
Barings BDC: Solid BDC But Lack Of NAV Growth Reduces Appeal
Barings BDC operates as a business development company that generates its earnings through a portfolio of debt investments. BBDC's portfolio is highly diversified, with 66% in first lien senior secured debt and 87% in floating rate investments. Despite solid net investment income and a strong dividend yield of 10.6%, BBDC's NAV growth has been lackluster, limiting future growth appeal.
Palmer Square Capital: New BDC With Already Attractive Investment Case
Palmer Square Capital BDC was made public just back in January 2024. Even though there is a limited track-record for PSBD as a publicly traded BDC, the fundamentals are already there to support a bullish thesis. In this article I elaborate on the key strengths and some of the drawbacks of PSBD.
Sixth Street Specialty Lending: A 10% BDC Yield For A Recession
Sixth Street Specialty Lending's net funded investment activity declined in 2Q24 due to higher repayments, but it comfortably out-earned its dividend with a 10% yield. The BDC maintains a diversified, high-quality First Lien-focused portfolio with low exposure to cyclical investments, making it a relatively secure investment. Despite a 23% premium to NAV, Sixth Street Specialty Lending's consistent dividend coverage and solid credit profile support a 'Hold' rating.
MSDL: Attractive Entry Point On Lock-Up Expiry In This 11.6% Yielding BDC
MSDL delivered a strong Q2 with a 3.2% total NAV return and a rise in both NAV and NII. The stock trades at an 11.6% yield and a slight discount to book. The valuation rose post-IPO but dipped after the first lock-up expiry; another potential entry point may arise in October.
Belden (BDC) Is a Great Choice for 'Trend' Investors, Here's Why
Belden (BDC) could be a great choice for investors looking to make a profit from fundamentally strong stocks that are currently on the move. It is one of the several stocks that made it through our "Recent Price Strength" screen.
3 Lessons Learned From Struggling BDCs After Q2 Earnings
The BDC sector faces headwinds such as spread compression, potential Fed rate cuts, and increased corporate distress. Despite these challenges, BDC market indices like VanEck BDC Income ETF and Putnam BDC Income ETF show only minor corrections. Yet, the small, illiquid nature of the BDC sector means ETFs may not fully capture overall sector dynamics.
Kayne Anderson BDC: A First Look Gets A Hold
Kayne Anderson launched KBDC in late 2021, joining other established firms in the Business Development Corporation investment sector. It went public last spring. KBDC's investment strategy focuses on generating current income through first lien senior secured loans to middle market companies. The firm plans to leverage Kayne Anderson's established loan sourcing channels and underwriting process to achieve its investment objectives.
BDC Weekly Review: Q2 Wrap-Up
We take a look at the action in business development companies through the fourth week of August and highlight some of the key themes we are watching. BDCs were up nearly 1% on the week, partly retracing the early August drop. Over Q2 sector net investment income and portfolio yield were flat or slightly lower while non-accruals rose.
Bargain: Very Undervalued Bonds From Investment Grade Prospect Capital
Prospect Capital is a large investment grade business development company. Its bonds yield around 8% while other large-cap BDC bonds with the same credit rating are yielding around 5.5%. To add to the undervaluation, PSEC has by far the lowest leverage among its large-cap BDC peers, making it extremely safe.
