In this report, we compare 40+ big-yield BDCs, including a special focus on industry stalwart, Ares Capital (ARCC). Specifically, we rank the BDCs based on various metrics, including price-to-book value, dividend yield and a variety of other factors. We then dive into the specifics on Ares, including a discussion of how it is fortifying its financials for a potential macroeconomic storm. We conclude with our strong opinion about investing in BDCs at this point in the market cycle, and our specific views on investing in Ares Capital, in particular.
Ares Capital: Big-Yield BDC, Fortifying for the Storm
Ares Capital is a popular big-dividend (9.7% yield) BDC. It has a long track record of success in providing capital (financing) to diverse middle market companies. However, on a go-forward basis, you cannot feasibly underwrite all 490 portfolio companies Ares works with. Fortunately, Ares does it for you, and they’re good at it. Also fortunately, you do have the ability to assess the current market environment (i.e. the big macroeconomic challenges that are coming) and how it will affect Ares’ unique business (we also do this for you in this report). And after reviewing Ares in detail (i.e. the business, the financials, the risks), we conclude with our strong opinion on investing.
Cloud Monitoring & Analytics: Massive, Out-of-Favor, Sticky Revenue Growth
The company we review in this report provides a cloud-based data monitoring platform. The shares are out of favor (~50% below all-time highs) but revenue continues to grow rapidly, it is very sticky (land and expand) and this highly-ranked industry leader is supported by a massive secular trend (digitization and cloud migration). In this report, we analyze the company’s business model, its market opportunity, financials, valuation, risks, and then finally conclude with our strong opinion on whether the shares are worth considering for investment.
More Gains For Stocks: Climbing a Wall of Worry
Stocks have posted strong gains over the past week, and are set to rise further (over the long-term) despite a wall of worry. The gains come on strong quarterly earnings results (from Artificial Intelligence stocks, in particular) and a resolution on the debt ceiling. There are so many great investment opportunities right now for patient and disciplined investors (both growth and income opportunities).
Ares: 40 Big-Yield BDCs, Silicon Valley Bank Warning
Business Development Companies (“BDCs”) are like banks, only riskier. And some BDCs are heavily concentrated in the venture capital (“VC”) space, just like Silicon Valley Bank (SIVB) that just shuttered its doors as the result of a VC-led bank run. In this report, we review Ares Capital (including its investment industry exposures and risks) and then compare it to 40 other BDCs, including four in particular that are heavily concentrated in the VC space. We conclude with our strong opinion about investing in BDCs, Ares Capital and VC-focused BDCs in particular.
Big-Yield mREITs: P/B Data and Ratings
Top 25 Big-Yield Funds, Ranked (6.0% to 12.0%+ Yields), ETF and CEF Edition
If you like your investments to pay you high income now—this report may be right for you. We countdown our top 25 big-yield Exchange Traded Funds (“ETFs”) and Closed-End Funds (“CEFs”) with yields of 6.0% to over 12.0%, and carefully highlighting the important nuances of these two distinct investment vehicles, while also avoiding the gimmicky yield traps that sadly dupe so many unsuspecting investors. We start with some high-level advantages and disadvantages of ETFs versus CEFs, then rank our top big-yield funds, starting with #25 and counting down to our top ideas.
Top 10 Big Yields: BDCs, MLPs, REITs and CEFs
The market has been ugly this year. Steep interest rate hikes are not yet slowing inflation, but they are dragging down stock and bond prices, as energy costs continue to soar. And as counterintuitive as it may seem, these conditions are creating select attractive contrarian opportunities, particularly for disciplined high-income investors. In this report, we share data on over 100 big-yield investments (including REITs, MLPs, CEFs and BDCs), and then rank our top 10, starting with 10 and counting down to our top idea.
Realty Income: 50 Big-Dividend REITs Compared
Realty Income (known as the monthly dividend company) has been a safe haven this year as markets have declined sharply but Realty Income’s share price has remained roughly flat. However, some investors are left wondering if Realty Income still offers an attractive valuation or if it’s time to shift new investment dollars elsewhere. We offer our opinion on the relative attractiveness of the shares, including a discussion of business strategy, the risks and the current valuation as compared to 50 other big-dividend REITs.
Honeywell: Growth-Value Debate, Big Dividend Growth
In the “olden days,” it was widely accepted that value stocks outperform growth stocks over the long-term. But as central bankers have gotten increasingly involved in the last few batches of market cycles, growth stocks (supported by easy money) have been dominating—until this year. And if the US Fed’s now increasing interest rate trajectory is any indication, value stocks may again return to extended periods of outperformance. Shares of diversified industrial company, Honeywell (HON), fall into the value stock category, and may be worth considering. This report reviews Honeywell’s business, its valuation and risks, and then concludes with our opinion on investing.
Shopify: Meme Stock, New Market Paradigm
We first purchased Shopify at ~$143 per share in August of 2018. It now trades at ~$333 per share. Not a bad return—until you realize the shares have fallen over 80% in the last 6 months! This report compares Shopify’s business fundamentals (including its business strategy, ongoing revenue growth and margins) to its current valuation, and then examines the question of whether Shopify CEO, Tobias Lütke, continues to imprudently push an easy-money, high-growth business strategy in an increasingly sober new market paradigm—now characterized by higher costs of capital and a starkly less friendly meme stock environment (yes—Shopify is a meme stock). We conclude with our opinion on who might want to invest—or if it’s simply time to sell and move on.
Top 10 Big Dividends: REITs, BDCs, Bond CEFs, Energy and More (4-10% Yields)
When it comes to income investing, investors have a lot of choices. And considering the current macroeconomic environment (inflation, the fed, market declines, recession risks) many investors are left flummoxed concerning their next move. In this report, we share our top 10 big-dividend opportunities, including two ideas from each of the following five categories: REITs, BDCs, Bond CEFs, dividend-growth stocks and energy investments. The yields range from 4% to over 9%, and we share some high-level macroeconomic perspective before we get into the countdown.
Verizon: 5.2% Yield, 4 Risks Worth Considering
The share price of steady dividend-growth stock, Verizon, is still down more than 11% following its latest earnings release. And the 5.2% dividend yield is increasingly tempting for many income-focused investors (especially in our current volatile market). But the outsized dividend doesn’t come without risks. In this report, we review Verizon’s business, its dividend safety, the current valuation and four big risks the company currently faces. We conclude with our opinion on who might want to consider investing.
Roku: Despite Massive Sell Off, False Headwinds Still Exist
Roku (ROKU) shares are down 85%. And while some investors celebrate the bursting of what they believe was an obvious pandemic bubble stock, things could still get worse. For example, the Fed’s hawkishness is driving us into recession, Roku’s earnings are again negative and the shares remain highly shorted right along with many other now infamous “high-growth” stocks. In this report, we review Roku’s business, its growth opportunities, its valuation, the multitude of headwinds that many investors are now increasingly aware of (such as supply chain issues, competitive threats, slowing growth), and then conclude with our opinion on investing.
STAG's 4.4% Yield: 3 Big Risks Drive Price Lower
If you are an income-focused investor, you probably like investing in REITs for their often big, steady, dividend payments. However, you may have noticed that following years of strong outperformance, the industrial REIT sector (including monthly-dividend payor, STAG Industrial (STAG)) has recently sold off hard. This report reviews STAG’s business, including information on the 3 big risk factors contributing to its relatively lower valuation multiple—as compared to industry peers (especially following the recent big Industrial REIT sector sell off), and then concludes with our opinion on investing.
CrowdStrike: This “Ain’t” Their First Rodeo
CrowdStrike founder and CEO, George Kurtz, has founded and led multiple successful cybersecurity businesses, and he knows the drill. Specifically, CrowdStrike is a high-margin Software-as-a-Service company with highly attractive recurring revenues that continue to grow rapidly in a large (and expanding) total addressable market (cybersecurity). What’s more, despite the continuing rapid growth, the valuation has come down, thereby making the shares even more compelling to some investors. In this report we share our opinion on whether CrowdStrike is worth considering for investment at these levels (valuation), or if it’s just another overhyped growth stock that is being valued too much on a euphoric narrative and not enough on its underlying fundamentals.
Owl Rock’s 9.1% Yield: Credit Spread Risks, Rewards
Business Development Companies, or BDCs, make the loans that big banks generally will not (or cannot, due to regulatory rules). However, like big banks, BDC bottom lines usually come down to simply net interest margins (i.e. the margin between the rate they borrow at and the rate they lend at), assuming they can survive any macroeconomic turmoil, considering they have much higher sensitivity than do the big banks. Interest rates are trending sharply higher (as the Fed fights inflation), and this can be very good (or very bad) for big-dividend BDCs (like Owl Rock). In this report, we share our opinion on whether Owl Rock’s big 9.1% dividend yield is attractive and worth considering, or whether the risks are simply too great and if investors should avoid the shares.
This Steady Growth Juggernaut is a Gift from the Market
There is a lot to like about the highly-profitable business we review in this report, including its high margins, powerful revenue growth, large total addressable market opportunity, impressive history of dividend growth (10+ years) and its compelling valuation. The company helps consumers and small businesses make short work of their financial responsibilities and challenges. And the shares have absurdly lost nearly 50% of their value since November as they’ve gotten caught up in the recent market-wide high-growth selloff. Yet, yesterday’s earnings announcement makes clear this business is still quite healthy (they again exceeded expectations) and on track to do even better (perhaps dramatically so) in the years ahead.
Attractive 7.1% Yield BDC: Monthly Dividend, Compelling Valuation
The well-managed, blue-chip, Business Development Company (“BDC”) we review in this report currently trades at a compelling price, it offers a healthy dividend, and it sits at an attractive spot in the current business cycle. But is it worth investing? This report reviews all the details and then concludes with our opinion on investing.
CEF Rover: Bond CEFs Are Ugly--Could Get Uglier
This quick note shares data on over 100 big-yield (7% to 14%+) bond Closed-End Funds (“CEFs”), including discounts/premiums, recent returns, amount of leverage, and more. Returns have been ugly this year (as interest rates have risen), and they could get uglier considering the Fed is set to keep raising, losses will be magnified by the use of leverage, and forced “fire sales” could make matters worse as the funds mathematically bump up against regulatory leverage limits. Caveat Emptor.