Updated: June 3, 2016
Business development corporations (BDCs) are a great addition to a high-yield portfolio. With yields over 8%, and sometimes even over 10%, these companies provide a strong income stream right now, and can bolster the overall yield of your portfolio.
But BDCs can be dangerous. Because they are legally required to return 90% of their income to shareholders, and because they regularly issue a lot of new shares to expand operations, capital gains are rare in these asset classes and dividend cuts are common. BDC investors need to carefully track how companies’ net investment income (NII) is trending, because they use NII to fund payouts.… Read more