Chicago Atlantic BDC: Remains Resilient But Limited Growth Potential (Rating Downgrade)
LIEN offers a high 12.6% yield and unique cannabis industry focus, but faces growth and regulatory risks in the current environment. Dividend coverage has weakened, with net investment income barely covering distributions, raising concerns about sustainability and potential for a cut. Portfolio quality remains solid with no non-accruals and reduced PIK income, but limited growth and high rates constrain NAV expansion.
BDC Weekly Review: State Street Reboots Its Private Credit Effort
We take a look at the action in business development companies through the fourth week of June and highlight some of the key themes we are watching. BDCs remain attractively valued, with sector valuations still below historical averages. State Street's new private credit ETF aims to address prior flaws, but investors should remain cautious about liquidity and fee structures in these products.
BDC Dividend Cut Storm Likely Ahead
High-income investors face limited options for sustainable, high-yield investments, with traditional asset classes often highly correlated and yields rarely exceeding 7-9%. Business Development Companies (BDCs) offer attractive yields averaging 12.8%, with several high-quality players maintaining dividends even through challenging periods like COVID-19. However, rising interest rates pose a significant risk to BDC dividend sustainability, making it critical to reassess current exposures and avoid potential value impairments.
My Top 2 BDC Picks Right Now
The BDC market's days of outperformance are likely over, with high yields but limited price and dividend growth expected going forward. Despite sector headwinds like lower base rates and falling credit spreads, select BDCs still offer attractive risk-reward for income-focused investors. In the article, I discuss my Top 2 BDC choices, which offer 10%+ yields that are backed by the industry-leading fundamentals.
Fidus Investment: The Right 11% Yielding BDC For Lower Rate Market
FDUS trades at a 2% premium to NAV and offers an 11%+ dividend. Even though the BDC market outlook is unfavorable, in my view, it is worth paying a slight premium here. I discuss in detail why FDUS is, arguably, one of the best BDC picks now in the context of a (very likely) falling interest rate market.
Jerome Powell Just Gave A Huge Gift To BDC Investors
BDCs have been facing an increasingly unfavorable environment recently. However, Jerome Powell just gave a big gift to BDC investors. We discuss what this gift is and how it is impacting our view on the BDC sector.
Ares Capital: An Overly Cautious BDC Prepared For Uncertainty
Ares Capital remains the most conservatively managed BDC, with strong liquidity, low leverage, and a robust dividend track record. Despite solid fundamentals and portfolio growth, I maintain a 'hold' rating due to limited upside and potential headwinds from lower interest rates. ARCC's financial flexibility, increased spillover income, and prudent management position it well to weather economic uncertainty and potential volatility.
BDC Weekly Review: Portman Ridge Finance Wants To Start Over
We take a look at the action in business development companies through the third week of June and highlight some of the key themes we are watching. The BDC sector remains range-bound, with high-premium names outperforming. Portman Ridge Finance rebrands as BCP Investment Corporation, introduces monthly distributions, share buybacks, and adviser stock purchases post-merger with LRFC.
The BDC Promise Vs. My Portfolio: What I Learned The Hard Way
BDCs are high-yield assets that can come in handy for income investors. Yet, attractive yields tend to be there for a reason. In the article, I share my key lessons learned from my relatively successful BDC investment journey.
Blue Owl Technology Finance: Latest BDC IPO From Blue Owl
OTF offers a 10.1% yield and trades at a 7% discount; it faces near-term pressure from lock-up expiries. Portfolio quality is strong with low non-accruals and high diversification, but modest yields and a high fee structure limit net income. OTF is fairly valued; we would wait for a deeper discount before adding, given near-term headwinds and average returns.
2 New Additions To The BDC World: HBDC And Blue Owl Technology Under The Microscope
HBDC's top holdings include high-quality BDCs and investment-grade bonds, offering stable yields above 5.5% for conservative investors. Blue Owl Technology Finance Corp stands out with strong scale, a 9.8% portfolio yield, and a robust A1-equivalent credit rating. OTF's portfolio quality is excellent, with minimal non-performing loans and a high asset coverage ratio, signaling low-risk and strong protection.
Dividend Danger Zone: 1 BDC And I REIT Facing Potential Cuts
I favor BDCs and REITs for their attractive yields and solid fundamentals, making them key components of my income-focused portfolio. Yet, the current market conditions are unfavorable for both BDCs and REITs, with limited prospects for earnings growth, or price appreciation. Despite bargain valuations, investors must remain cautious, due to heightened risks of dividend cuts and permanent capital impairment.
