A BDC Pair Trade Opportunity By Hecrules Capital And Ares Capital
HTGC and ARCC, both top BDCs, show a current mispricing, with HTGC now undervalued relative to ARCC after a sharp premium correction. HTGC maintains superior long-term and recent NAV total returns compared to ARCC, and credit assessments show no portfolio concern. Pair trade opportunities exist: long HTGC/short ARCC if you expect HTGC's premium to recover, or long BIZD/short ARCC for sector mean reversion.
Goldman Sachs BDC: Does Its Dividend Yield Make It A Buy?
GSBD offers a 10.85% base dividend yield. This yield is being expanded with special and supplemental dividends. Fiscal 2025 first quarter earnings saw dual misses and a decline in NAV per share, with net investment income unable to fully cover the aggregate dividend payouts. The portfolio remains defensive with low non-accruals, but negative net funded investment activity and falling rates threaten future total investment income.
Ares Capital Is My Largest BDC Holding For A Reason
ARCC remains my largest BDC holding due to its resilience in uncertain times and diversified, high-quality portfolio of sizeable businesses. The company's lower exposure to floating-rate debt and meaningful equity investments help stabilize income despite falling interest rates. Non-accruals remain low and portfolio concentration is modest, supporting sustainable dividends and reduced risk of defaults.
BDC Weekly Review: Should We Trust BDC NAVs?
We take a look at the action in business development companies through the first week of July and highlight some of the key themes we are watching. BDCs delivered a strong 3% total return this week, with underperformers rebounding and sector valuations nearing historical averages. NAVs in volatile markets are best guesses and not precise; historical price behavior and resilience matter more for allocation decisions.
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.
