Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan
The Sure Dividend Investing MethodMember's Area

The 20 Highest Yielding BDCs | Yields Up To 15.8%


Published on March 28th, 2023 by Bob Ciura

Business Development Companies, otherwise known as BDCs, are highly popular among income investors. BDCs widely have high dividend yields of 5% or higher.

This makes BDCs very appealing for income investors such as retirees. With this in mind, we’ve created a list of BDCs.

You can download your free copy of our full BDC list, along with relevant financial metrics such as P/E ratios and dividend payout ratios, by clicking on the link below:

 

Click here to instantly download your free spreadsheet of all BDC Stocks now, along with important investing metrics.

We typically rank stocks based on their five-year expected annual returns, as stated in the Sure Analysis Research Database.

But for investors primarily interested in income, it is also useful to rank BDCs according to their dividend yields. This article will rank the 20 highest-yielding BDCs in our coverage universe.

Table of Contents

Why Invest In BDCs?

Business Development Companies are closed-end investment firms. Their business model involves making debt and/or equity investments in other companies, typically small or mid-size businesses. These target companies may not have access to traditional means of raising capital, which makes them suitable partners for a BDC. BDCs invest in a variety of companies, including turnarounds, developing, or distressed companies.

BDCs are registered under the Investment Company Act of 1940. As they are publicly-traded, BDCs must also be registered with the Securities and Exchange Commission. To qualify as a BDC, the firm must invest at least 70% of its assets in private or publicly-held companies with market capitalizations of $250 million or below.

Another unique characteristic of BDCs that investors should know before buying is taxation. BDC dividends are typically not “qualified dividends” for tax purposes, which is generally a more favorable tax rate. Instead, BDC distributions are taxable at the investor’s ordinary income rates, while the BDC’s capital gains and qualified dividend income is taxed at capital gains rates.

The following section ranks the 20 highest-yielding BDCs in the U.S. that are covered in the Sure Analysis Research Database. The stocks are ranked in order of lowest dividend yield to highest.

High Yield BDC #20: Gladstone Investment (GAIN)

Gladstone Investment focuses on US-based small- and medium-sized companies. Industries which Gladstone Investment targets include aerospace & defense, oil & gas, machinery, electronics, and media & communications.

Source: Investor Presentation

Gladstone Investment reported its third quarter (Q3 2022 ended December 31) earnings results in February. The company generated total investment income – Gladstone Investment’s revenue equivalent – of $21.6 million during the quarter, which represents an increase of 29% compared to the prior year’s quarter. This number beat the analyst consensus estimate by a strong $1.6 million, as analysts expected a weaker performance for the company’s top line.

Gladstone Investment’s adjusted net investment income-per-share totaled $0.30 during the fiscal third quarter. That was up 3% from the previous quarter’s level. Gladstone Investment‘s net asset value per share totaled $13.43 on a pershare basis at the end of the quarter, which was up marginally compared to the NAV-per-share that the company reported at the end of the previous quarter.

Click here to download our most recent Sure Analysis report on GAIN (preview of page 1 of 3 shown below):

High Yield BDC #19: Fidus Investment Corp. (FDUS)

Fidus Investment Corporation provides customized debt and equity financing solutions to lower middle-market companies. Its investment criteria comprise cash-flow-positive businesses generating predictable revenues in the range of $10-$150 million annually and at defensible and/or leading positions in their respective markets. Fidus Investments generates around $95 million annually in total investment income.

Source: Investor Presentation

On February 21st, Fidus Investment Corp. raised its base quarterly dividend by 13.9% to $0.41. On March 2nd, 2023, Fidus Investment Corp. reported its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, the company achieved a total investment income of $27.5 million, which was a 14% increase year-over-year.

Adjusted NII/share, which excludes the capital gains incentive fee accrual, rose from $0.49 to $0.51 as a result of lower total expenses. Fidus continued to grow its portfolio during the quarter, investing $65.9 million in four new companies. The portfolio now consists of 76 companies with a weighted average debt yield of 13.8% against Fidus’ own weighted average interest rate of around 4.0%, allowing for an industry-leading income spread.

I.T. services, business services, and component manufacturing comprise its most significant industry exposures, at 35.3%, 12.2%, and 6.2% of its total holdings, respectively. Fidus’ NAV/share rose slightly, coming in at $19.43 compared to $19.41 in the previous quarter.

Click here to download our most recent Sure Analysis report on Fidus (preview of page 1 of 3 shown below):

High Yield BDC #18: Gladstone Capital (GLAD)

Gladstone Capital is a business development company that primarily invests in small and medium businesses. These investments are made via a variety of equity (10% of portfolio) and debt instruments (90% of portfolio), generally with very high yields. Loan size is typically in the $7 million to $30 million range and has terms up to seven years. The BDC’s stated purpose is to generate income it can distribute to its shareholders.

Gladstone reported first quarter earnings on February 6th, 2023, and results were slightly better than expected. Net investment income came to 25 cents per share, which was a penny better than expected. Total investment income, which is akin to revenue, was up 21% year-over-year to $19.3 million.

This was nearly a million dollars better than estimates. The gain in the top line was due to higher interest income, driven by increased weighted average yield, as well as higher balances of interest-bearing investments. Net asset value per share was $9.06, down fractionally quarter-over-quarter.

Click here to download our most recent Sure Analysis report on GLAD (preview of page 1 of 3 shown below):

High Yield BDC #17: Golub Capital BDC (GBDC)

Golub Capital aims to generate interest income and capital appreciation by investing primarily in one-stop and other senior secured loans of U.S. middle-market companies. The company’s investment criteria require its potential investments to generate annual EBITDA of less than $100 million, have a sustainable leading position in their respective markets, and scalable revenues and operating cash flows.

Source: Investor Presentation

On February 8th, 2023 Golub Capital reported its fiscal Q1 2023 results for the quarter ended December 31st. As a result of a larger investment portfolio and higher interest rates, the company achieved a total investment income of $136.9 million, up 14.4% quarter-over-quarter.

Net investment income grew 18.3% to $63.9 million, as lower increase in expenses led to an expansion in investment margins. On a per-share basis, net investment income also rose from $0.32 to $0.36. On an adjusted basis, which excludes amortization of purchase premium per share, EPS grew from $0.33 to $0.37.

As of December 31st, 2022, Golub’s portfolio consisted of 332 investments, 85.4% of which were allocated in one-stop debt, 9.0% in senior secured debt, 5.0% in equities, and 0.6% in junior debt. Diversification by weight seems adequate, with the top 10 investments accounting for around 15% of the total portfolio. Software, healthcare services, and specialty retail make up the majority of Golub’s industry exposure.

Click here to download our most recent Sure Analysis report on Golub (preview of page 1 of 3 shown below):

High Yield BDC #16: Sixth Street Specialty Lending (TSLX)

Sixth Street Specialty Lending is a specialty finance company focused on providing flexible, fully committed financing solutions to middle-market companies principally located in the US. The fund provides primarily first-lien senior secured loans, mezzanine debt, non-control structured equity and common equity.

Management aims to co-invest with other firms to maximize the potential for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations and refinancing.

Source: Investor Presentation

As of its latest filings, Sixth Street’s portfolio includes 78 investments, with no company making up more than 2.8% of its net assets. Additionally, the portfolio aims to achieve adequate industry diversification, with Business Services, Internet Services, and Financial Services, accounting for 14.4%, 13.9% and 12.8% of its exposure, respectively, amongst 13 other industries.

On February 16th, 2023, Sixth Street Specialty Lending reported its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, net investment income came in robust at $52.6 million, up 13.9% year-over-year. NII/share was $0.65, two cents higher year-over-year, while NAV rose by 0.73% to $16.46 compared to last year.

The increase in net investment income was due to a larger portfolio of companies and a higher weighted average total yield on debt, which rose by 320 bps year-over-year to 13.4%.

Further, TSLX’s weighted average interest rate of debt rose by 330 bps to 5.6%. Finally, LIBOR was higher as well due to the ongoing hikes in interest rates. All variables combined led to the company’s weighted average spread over all floating rate investments rising from 8.5% to 8.7% year-over-year.

For the year, NII/share was $2.13, up from $1.97 in fiscal 2021. For FY2023, we expect NII/share of $2.00. The company also increased its quarterly base dividend by one cent to $0.46.

Click here to download our most recent Sure Analysis report on TSLX (preview of page 1 of 3 shown below):

High Yield BDC #15: Prospect Capital (PSEC)

Prospect Capital Corporation focuses on direct lending to owner–operated companies, as well as sponsor–backed transactions. Prospect invests primarily in first and second lien senior loans and mezzanine debt, with occasional equity investments. 

Source: Investor Presentation

Prospect reported fourth quarter and full-year earnings on February 8th, 2023, and results were mixed. The company posted net investment income of 23 cents per share, which was two cents better than expected. However, total investment income was $213 million. That was up 21% year-over-year, but missed estimates by about half a million dollars.

Interest as a percentage of total investment income was 89.6%, which was up sharply from 81.1% in the year-ago period, as the company is generating much more interest on its portfolio. This is the result of higher prevailing interest rates.

Click here to download our most recent Sure Analysis report on PSEC (preview of page 1 of 3 shown below):

High Yield BDC #14: Owl Rock Capital (ORCC)

Owl Rock Capital Corporation aims to invest and lend funds to U.S. middle-market companies that generate annual EBITDA between $10 million and $250 million and/or annual revenues of $50 million to $2.5 billion at the time of investment. The company generates around $1.2 billion in gross investment income annually.

On February 22nd, 2023, Owl Rock Capital reported its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, the company achieved a gross investment income of $350.5 million, 11.6% higher compared to Q4-2021. The increase was due to an expanded debt investment portfolio, higher dividend income, and rising rates. Net investment income was $162.5 million, 17.9% higher than the comparable period last year. NII/share also grew by six cents year-over-year, coming in at $0.41.

For the year, NII/share grew by 12.8% to $1.41. The company allocated $1.77 billion in new investments across 52 new and 23 existing portfolio companies during the year. At the end of Q4, the company’s portfolio had a size of $13.0 billion, comprising investments in 184 companies across 28 different industries. Internet software, Insurance companies, and Food/Beverage account for 13.3%, 9.3%, and 6.7% of its total holdings, respectively. Borrower diversification is at solid levels, with its top ten holdings making up 23% of the portfolio at their fair value.

Click here to download our most recent Sure Analysis report on ORCC (preview of page 1 of 3 shown below):

High Yield BDC #13: New Mountain Finance (NMFC)

New Mountain Finance Corp. specializes in financing quality, middle-stage businesses that display “defensive growth” characteristics. Its businesses typically generate anywhere from $10-$200 million of EBITDA, to which NMFC provides senior secured debt, including 1st lien, 2nd lien, and uni-tranche loans.

Its portfolio consists of 108 individual investments, the top 15 of which represent around $1.25 billion worth of equity stake or 38.6% of its investments. New Mountain Finance generated nearly $295 million of gross investment income last year.

Source: Investor Presentation

On February 27th, 2023, the company reported its Q4-2022 and full-year results for the period ending December 31st, 2022. During the quarter, the company generated a net investment income per share of $0.25, seven cents lower compared to the previous quarter.

Overall, operations remained very stable, and management reiterated that the company is well-positioned to continue finding opportunities in “defensive growth” industries. Management also mentioned they remain confident that net investment income per share will meet or exceed the company’s raised quarterly dividend for the foreseeable future. Due to the value of some of its equity positions depreciating, NAV/share fell by 1.4% to $13.02 during the quarter.

Click here to download our most recent Sure Analysis report on NMFC (preview of page 1 of 3 shown below):

High Yield BDC #12: Ares Capital (ARCC)

Ares Capital Corporation invests primarily in U.S. middle-market companies, as well as larger companies. Its portfolio is comprised of first and second lien senior secured loans as well as mezzanine debt, diversified by industry and sector.

Source: Investor Presentation

On February 7th, 2023, Ares Capital Corp. reported Q4 and FY2022 results. Q4 core EPS was $0.63, beating the $0.56 consensus, and rose from $0.50 in Q3 and from $0.58 in the year-ago quarter. Net investment income of $349M, or $0.68 per share, climbed from $288M, or $0.57 per share, in Q3 and from $242M, or $0.52 per share, in Q4 2021.

Net unrealized gains of $26M, or $0.05 per share, compared with unrealized losses of $184M, or $0.36 per share, in the prior quarter and unrealized gains of $16M, or $0.04 per share, in the year-ago period.

Portfolio investments at fair value were $21.8B as of Dec. 31, 2022, vs. $21.3B at Sept. 30. Net assets per share of $18.40 at the end of Q4 declined from $18.56 as pf Sept. 30. The debt/equity ratio was 1.29x vs. 1.27x at the end of Q3.

Click here to download our most recent Sure Analysis report on Ares (preview of page 1 of 3 shown below):

High Yield BDC #11: SLR Investment (SLRC)

SLRC is a Business Development Company that primarily invests in U.S. middle market companies. The company has five core business units which include cash flow, asset-based, life science lending, equipment finance, and corporate leasing.

The trust’s debt investments primarily consist of cash flow senior secured loans, including first lien and second lien debt instruments. It also offers asset-based loans including senior secured loans collateralized on a first lien basis by current assets.

On February 28th, 2023, SLR Investment Corp. reported its full-year results for the period ending December 31st, 2022. For the year, total investment income totaled $177.5 million, 27.3% higher year-over-year. The increase was primarily due to a larger portfolio as well as an increase in rates. Expenses totaled $102.7 million, 31% higher compared to last year.

The steeper increase in expenses was primarily due to SLR’s cost of borrowing surging. Thus, net investment income grew by a lesser 25% to $76.4 million. On a per-share basis, net investment income grew by just seven cents to $1.48 due to the additional shares utilized to fund the company’s investments.

Click here to download our most recent Sure Analysis report on SLRC (preview of page 1 of 3 shown below):

High Yield BDC #10: Stellus Capital (SCM)

Stellus Capital Management provides capital solutions to companies with $5 million to $50 million of EBITDA and does so with a variety of instruments, the majority of which are debt. Stellus provides first lien, second lien, mezzanine, convertible debt, and equity investments to a diverse group of customers, generally at high yields, in the US and Canada.

Source: Investor Presentation

Stellus reported fourth quarter and full-year earnings on February 28th, 2023, and results were better than expected on both revenue and earnings. The company noted adjusted net investment income per-share of $1.38, which was five cents better than estimated. Total investment income, which is akin to revenue, was up almost 18% to $75.1 million, and beat estimates by almost $2 million.

The company saw a boost in net assets results from operations of $14.5 million for the quarter, and $33.6 million for the year, which equates to 74 cents per share and $1.72 per share, respectively. The company noted its portfolio of loans is 97% floating rate, while its liabilities are 65% fixed rate. This means that as rates rise, the company has a much larger increase in net interest income, but the reverse is true as well.

Stellus also boosted its monthly dividend to $0.1333 per share, which is a massive 43% increase from the prior level, and represents its highest annualized payout for over a decade.

Click here to download our most recent Sure Analysis report on Stellus (preview of page 1 of 3 shown below):

High Yield BDC #9: Horizon Technology Finance (HRZN)

Horizon Technology Finance Corp. is a BDC that provides venture capital to small and medium–sized companies in the technology, life sciences, and healthcare–IT sectors.

The company has generated attractive risk–adjusted returns through directly originated senior secured loans and additional capital appreciation through warrants.

Source: Investor Presentation

On February 28th, Horizon released its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, total investment income grew 36.6% year-over-year to $23.1 million, primarily due to growth in interest income on investments resulting from an increase in the average size of the debt investment portfolio and an increase in the base rate for most of the company’s variable rate debt investments.

Net investment income per share (ISS) rose to $0.40, one cent higher compared to Q4-2022. Net asset value (NAV) per share landed at $11.47, 1.6% lower sequentially or 0.8% lower year-over-year. After paying its monthly distributions, Horizon’s undistributed spillover income as of December 31st was $0.68 per share, indicating a considerable cash cushion. The portfolio remained relatively stable, holding 98 businesses at the end of the quarter.

Click here to download our most recent Sure Analysis report on HRZN (preview of page 1 of 3 shown below):

High Yield BDC #8: PennantPark Floating Rate Capital (PFLT)

PennantPark Floating Rate Capital Ltd. is a BDC that makes secondary direct, debt, equity, and loan investments.

The fund also aims to invest through floating rate loans in private or thinly traded or small–cap, public middle market companies, equity securities, preferred stock, common stock, warrants or options received in connection with debt investments or through direct investments.

Source: Investor Presentation

It generally invests in the United States and to a limited extent non–U.S. companies. It aims to invest in companies not rated by national rating agencies.

On February 8th, 2023 PennantPark Floating Rate Capital Ltd. announced financial results for the first fiscal quarter ended December 31, 2022. The Board of Directors declared a distribution of $0.10 per share, an increase of 5.3% from the most recent distribution. For the three months ended December 31, 2022 investment income was $31.3 million, which was attributable to $27.6 million from first lien secured debt and $3.7 million from other investments.

For the three months ended December 31, 2021 investment income was $26.3 million, which was attributable to $20.1 million from first lien secured debt and $6.2 million from other investments. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the cost yield of the company’s debt portfolio.

Click here to download our most recent Sure Analysis report on PFLT (preview of page 1 of 3 shown below):

High Yield BDC #7: Capital Southwest Corp. (CSWC)

Capital Southwest Corporation is an internally managed BDC. The company specializes in providing customized debt and equity financing to lower middle market (LMM) companies and debt capital to upper-middle market (UMM) companies located primarily in the United States.

The company has a long history of paying out regular and supplemental dividends.

Source: Investor Presentation

On January 30th, 2023, Capital Southwest increased its base dividend by 1.9% to a quarterly rate of $0.53. The company announced a supplemental dividend of $0.05, in line with its prior supplemental dividend. On the same day, Capital Southwest reported its Q3 results for the period ending December 31st, 2022.

For the quarter, the company achieved a total investment income of $32.8 million, 22.3% higher than the previous quarter. The increase in investment income was primarily attributable to an increase in average debt investments outstanding, an increase in the weighted average yield on investments, and higher dividend income. Pre-tax net investment income (NII) came in at $8.7 million, 24.6% higher than in Q2-2023.

On a per-share basis, pre-tax net investment income came in at $0.60 compared to $0.51 in the previous quarter. For fiscal 2023, our estimates point toward a pre-tax NII/share of $2.15.

Click here to download our most recent Sure Analysis report on CSWC (preview of page 1 of 3 shown below):

High Yield BDC #6: Goldman Sachs BDC (GSBD)

Goldman Sachs BDC provides specialty finance lending to U.S.-based middle-market companies, which generate EBITDA in the range of $5-$200 million annually, primarily through “unitranche” first-lien loans. The company will usually make investments that have a maturity between three and ten years and in size between $10 million and $75 million.

On February 23rd, 2023, GSBD announced its Q4-2022 and full-year results for the period ending December 31st, 2022. For the three-month period, the company achieved a total investment income of $106.5 million, compared to $95.2 million in the previous quarter.

The increase in investment income was primarily driven by an increase in interest rates. Net investment income (NII) also rose from $61.2 million in Q3 to $67.6 million as a result. On a per-share basis, NII came in at $0.66, up from $0.60 in Q3.

As of December 31st, GSBD’s portfolio comprised 134 companies with a fair value of around $3.50 billion. The investment portfolio was comprised of 94.3% senior secured debt, including 89.3% in first lien investments. The portfolio’s amortized yield at cost comes in at 11.7%.

GSBD’s investments are well-diversified, with Software, Diversified Financial Services, and Healthcare Providers accounting for 14.7%, 11.3%, and 11.2% of its total portfolio, respectively. Net asset value per share declined 2.72% to $14.61 from $15.02 sequentially.

Click here to download our most recent Sure Analysis report on GSBD (preview of page 1 of 3 shown below):

High Yield BDC #5: Monroe Capital (MRCC)

Monroe Capital Corporation is focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. It is externally managed by Monroe Capital. The company primarily invests in senior and “unitranche” secured loans ranging between $2.0 million and $25.0 million each. It generates nearly $57 million annually in total investment income.

Source: Investor Presentation

On March 1st, 2023, Monroe Capital Corporation reported its Q4-2022 and full-year results for the period ending December 31st, 2022. Total investment income for the year came in at $56.6 million, compared to $53.8 million in the previous year.

The $2.7 million increase was primarily the result of increases in portfolio yield resulting from the rising rate environment and the one-time benefit from the receipt of previously unrecorded interest income associated with the repayment of the Company’s loan investment in Curion.

Net investment income per share came in at $1.02, a cent lower from last year’s $1.03. The decline was due to the company recording $22.2 million in net investment income in both periods but having a slightly higher share count in FY2022. Net asset value (NAV) per share fell 9.7% to $10.39 during the year, primarily due to net unrealized losses on a couple of specific portfolio companies.

As of December 31st, 2022, the Company’s portfolio comprised 105 companies totaling $541 million, with a weighted average annualized yield of 11%. About 84% of its funds are allocated in 1st Lien Senior Secure and 1st Lien “unitranche” securities, while equities only account for just about 7.5% of its investments.

Click here to download our most recent Sure Analysis report on MRCC (preview of page 1 of 3 shown below):

High Yield BDC #4: Oxford Square Capital (OXSQ)

Oxford Square Capital Corp. specializes in financing early and middle–stage businesses through loans and CLOs. The company holds an equally split portfolio of First–Lien, Second–Lien, and CLO equity assets spread across 8 industries, with the highest exposure in business services and healthcare, at 36% and 25%, respectively.

Source: Investor Presentation

On March 21st, 2023, Oxford Square reported its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, the company generated approximately $11.9 million of total investment income, up 4.3% from the previous quarter.

The rise in total investment income was due to rising interest rates. Specifically, the weighted average yield of the debt investments came in at 11.9% at current cost, compared to 10.4% during Q3-2022. This increase was partially offset by a lower cash distribution yield from OXSQ’s CLO equity investments, which declined from 16.6% to 13.0% sequentially.

As a result of a higher total investment income and lower expenses, NII amounted to $6.5 million, or $0.13/share, compared to $5.6 million or $0.11 sequentially. Net asset value (NAV) per share was $2.78 compared to $3.34 last quarter. This was due to a decrease in the value of the company’s assets.

Click here to download our most recent Sure Analysis report on OXSQ (preview of page 1 of 3 shown below):

High Yield BDC #3: TriplePoint Venture Growth BDC (TPVG)

TriplePoint Venture Growth BDC Corp specializes in providing capital and guiding companies during their private growth stage, before they eventually IPO to the public markets.

TPVG offers debt financing to venture growth companies, proposing a less dilutive way to raise capital than raising additional equity while also helping with the businesses’ acceleration and expansion.

Source: Investor Presentation

On March 1st, 2023, TriplePoint announced an 8% increase to its common distribution to a quarterly rate of $0.40. On the same day, the company posted its Q4-2022 and full-year results for the period ending December 31st, 2022. For the quarter, the company achieved a total investment income of $34.9 million compared to $25.9 million in Q4-2021.

The increase in total investment was primarily due to a greater weighted average principal amount outstanding on TriplePoint’s income-bearing debt investment portfolio and higher investment yields.

Specifically, the company’s weighted average annualized portfolio yield during the period was 14.7%, compared to 13.7% last year. Further, the company funded $416.6 million in debt investments to 40 portfolio companies with a 14.2% weighted average annualized portfolio yield at origination over the past year.

Net investment income (NII) per share was a record $0.58, compared to $0.42 in Q4-2021. This was due to the increase in net investment income between periods which was, in turn, driven primarily by greater investment and higher investment margins.

Click here to download our most recent Sure Analysis report on TPVG (preview of page 1 of 3 shown below):

High Yield BDC #2: Hercules Capital (HTGC)

Hercules Capital markets itself as the largest specialty finance company in the United States. The company focuses on providing senior secured venture growth loans to high-growth, innovative VC-backed companies in the sectors of technology, life sciences, and renewable energy.

Since Hercules Capital’s inception in December of 2003, the company has committed billions of dollars to scores of companies. Hercules Capital owns primarily debt securities as well as some equity securities and warrants.

HTGC announced its Q4 results on February 16th, 2023. The company’s GAAP EPS for the quarter was $0.47, beating estimates by $0.06. The total investment income was $100.2M, which is a 38.3% year-over-year increase, and exceeded expectations by $9.36M. The NII for Q4 2022 provided a coverage of 121% of the recently increased base distribution.

Additionally, there was an undistributed earnings spillover of $124.6 million, which is equivalent to $0.94 per ending share outstanding. The company’s assets under management increased by 29.3% year-over-year, amounting to over $3.6 billion.

Click here to download our most recent Sure Analysis report on HGTC (preview of page 1 of 3 shown below):

High Yield BDC #1: Great Elm Capital (GECC)

Great Elm Capital Corporation is a business development company that specializes in loan and mezzanine, middle market investments. It seeks to create long–term shareholder value by building its business across three verticals: Operating Companies, Investment Management, and Real Estate.

The company favors investing in media, healthcare, telecommunication services, communications equipment, commercial services and supplies.

Source: Investor Presentation

Great Elm Capital Corporation released its fourth quarter and FY2022 results on March 2nd. The company reported net investment income of $2.3 million for the quarter ended December 31, 2022, which more than doubled NII of $1.1 million for the previous quarter. This increase was attributed to capital deployment, rotation into higher yielding floating rate investments, and lower expenses.

However, the company’s net assets were negatively impacted by unrealized losses on certain investments. GECC partnered with an affiliate of Berkadia Commercial Mortgage, LLC to form Great Elm Healthcare Finance, LLC (GEHF). GEHF is a specialty, asset-based lending platform that provides capital to healthcare-related businesses across the U.S.

As of December 31, 2022, GECC’s asset coverage ratio was approximately 154.4%, a decrease from 165.5% as of September 30, 2022, and an increase from 151.1% as of December 31, 2021.

Click here to download our most recent Sure Analysis report on GECC (preview of page 1 of 3 shown below):

Final Thoughts

Business Development Companies allow investors the opportunity to invest indirectly in small and mid-size businesses. And, BDCs have obvious appeal for income investors. BDCs widely have high dividend yields above 5%.

Of course, investors should consider all of the unique characteristics, including but not limited to the tax implications of BDCs. Investors should also be aware of the risk factors associated with investing in BDCs, such as the use of leverage, interest rate risk, and default risk.

Further Reading

If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:

High-Yield Individual Security Research

Other Sure Dividend Resources

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


More from sure dividend
The Sure Dividend Investing MethodMember's Area


articles
Golden Rule Commitment
contact - legal - testimonials