If You’re Hunting for Yield, Look at These Three BDCs for 2021


For investors looking for stable, high-yielding income opportunities, consider BDCs, or business development companies.

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According to Kiplinger:

BDCs are similar to their cousins, real estate investment trusts (REITs), in that both were creations of Congress to stimulate investment, and both benefit from preferential tax treatment. They pay no income taxes at the corporate level so long as they pay out at least 90% of their net income to their investors as dividends. This is why BDCs, along with REITs, tend to have such high dividend yields. They’re legally mandated to pay out nearly every red cent.

Look at Main Street Capital (MAIN), for example. At $41.45 a share, investors in MAIN are offered a dividend yield of 5.93%. In its most recent quarter, the company—which is involved in long-term debt and equity capital—saw net investment income of $42.4 million, or $0.62 per share, as noted in a company press release. In addition, it saw a net increase in net assets from operation of $95.1 million, or $1.39 a share.

Or take a look at Apollo Investment Corp. (AINV). At $13.50, AINV offers a yield of 9.39%, and just reported a solid quarter. In fact, according to the company’s press release, net investment income came in at breakeven at $0.39. New investment commitments came in at $332 million.

In addition, according to Howard Widra, AINV’s CEO in the same release: “During the quarter we continued to make ongoing progress reducing our exposure to junior capital and non-core positions while increasing our exposure to first lien floating rate corporate loans. Our corporate lending portfolio continues to perform well and is benefiting from its first lien orientation and an improving economic backdrop.”

A third BDC to consider is Prospect Capital (PSEC). At $8.05, PSEC carries a yield of 8.96%. This BDC, which is involved with debt and equity investments in the U.S., is set to release earnings on Tuesday, August 24 after closing bell.

Again, if you’re looking for stabile, high-dividend paying opportunities, BDCs may offer exactly what you’re looking for.

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