Business Development Companies (BDCs) continue to provide big steady yields (income) to investors despite a challenging BDC environment, including interest rate volatility, increasing competition and economic uncertainty. Although BDC strategies are varied, they generally provide loans to riskier private business where traditional bank lending is less suitable, and then reduce aggregate risks by doing so through a diversified portfolio (within their areas of expertise). Many are facing selling pressure (see 14-day money flow index) and some trade below book value (generally an indication of fear, depending the the particular BDC strategy). Increasingly compelling contrarian yield opportunities in an otherwise greedy market environment.
Big-Yield BDC Comps: ARCC, MAIN, OBDC, OCSL
A lot of income-focused investors are attracted to BDCs for their large dividend yields. However, not all BDCs are created equally. In the following table you will see comparative data for top BDCs, including the percent of investments that have fixed-versus-floating rates, the percent of debt they have that is fixed-versus-floating rate, price-to-book value, current dividend yields and the percent of first lien loans they have made as investments.
Blue Owl Merger: BDC Storm Clouds Ahead, 11.9% Yield
The recently announced merger between Blue Owl’s two publicly-traded BDCs (OBDC) and (OBDE) is a warning sign that investors should heed. In particular, the combination between OBDC (flagship) with OBDE (slightly-more-conservative) is a precautionary step. Here is how we expect it to play out for Blue Owl and for the BDC industry in general.
High Income NOW: Updated Top 10 Tear Sheet, 23-Position Portfolio (9.7% Yield)
Our Top 10 “High Income NOW” Tear Sheet has been updated. And so has our complete 23-position “High Income NOW” Portfolio (aggregate yield is 9.7%). There have been several new positions added, two complete sales and some rebalancing of existing positions. You can also access “buy under” prices relative to current market prices, plus additional aggregate and security-specific data.
*New Trade: Sold Owl Rock (Now Blue Owl), Purchased This BDC Instead, 11.2% Yield
This is a quick note to let readers know we have placed a new trade in our Blue Harbinger High Income NOW and Income Equity portfolios. Specifically, we have sold 100% of our position in Owl Rock Capital (ORCC) (recently renamed Blue Owl, (OBDC)) and replaced it with this (see below) highly attractive 11.2% yield BDC instead. We’ll be updating our portfolio tracker sheets shortly, but wanted to share this information with readers right away.