Dividends From The BDC Sector Driving Higher Returns (BDCBuzz).


Summary

  • BDCs have done well this year with a wide range of results and higher quality BDCs mostly outperforming the others.
  • BDCs currently have average dividend yields of around 10%.
  • Investors should be ready for another December pullback providing higher yields and returns in 2020.

This idea was discussed in more depth with members of my private investing community, Sustainable Dividends. Get started today »

BDC Total Returns

As predicted in previous articles, business development companies (“BDC”) continue to do well with an average total return of almost 24%. However, there is a wide range of results and the market has started to pullback. The table below shows the total returns by BDC using ex-dividend dates for calculating dividends accrued/paid.

For example, the following table shows the dividend history for Hercules Capital (HTGC) which has already accrued and paid its Q4 2019 dividends:

Source: Fidelity Investments

The following table shows the recent dividend history for Main Street Capital (MAIN) which has ex-dividend dates of 12/12/19 for the special and 12/27/19 for the last monthly regular dividends which are not included in the 2019 total returns yet:

Source: Fidelity Investments

I have included bond ETFs iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays Capital High Yield Bond ETF (JNK) which continually underperform for the reasons discussed in “Search For Yield: Bond Funds Vs. BDCs Paying 10%+.”

Overperformers

As shown in the following table, GAINGLADFDUSTPVGHTGCMAINARCCSUNS, and TSLX have all been among the top performers for net asset value (“NAV”) per share performance over the longer term. However, TPVG, HTGC, MAIN, OTC:AINV, GLAD, SUNS have had recent declines in NAV and I will discuss in upcoming articles.

Underperformers

I do not actively cover many of these BDCs including MCCPTMNOXSQGARSBKCC, and OCSI, but all of them have previously had credit issues, dividend cuts, NAV declines, and most of them have recently changed out management or are in the process.

Stellus Capital Investment (SCM) has done much better than the average when it comes to NAV per share performance and I will be adding to active coverage later this year including risk profile and target pricing.

Previous Articles Discussing Risk Profiles & Changes to NAV Per Share

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