This particular Oaktree BDC invests primarily in high-yield, first lien, liquid, middle-market debt. And even though its share price has been hit hard by the COVID-19 pandemic (as most BDCs have been), Oaktree has been positioning the portfolio and balance sheet conservatively for multiple years in anticipation of stressed market conditions (such as the current market environment), so it can not only weather the storm, but also so it has the financial wherewithal to be opportunistic when other BDCs cannot. This is also a big part of the reason OCSI recently proactively reduced its dividend—a smart thing for new investors, in our view. This report reviews the business, COVID-19 impacts, dividend prospects, valuation and risks. We conclude with our opinion about the attractiveness of this 8.0% yield BDC.
Owl Rock’s 10% Dividend: Different Than Other BDCs
The negative impacts of COVID-19 have been particularly pronounced for many Business Development Companies (“BDCs”). Owl Rock Capital Corp (ORCC) is one example where the share price has been pushed lower and the dividend yield has mathematically risen to over 10% (over 12.5% if you count the recently declared special dividend). Owl Rock’s strong liquidity position will help it whether the current storm and take on attractive new opportunities once it has addressed the most pressing liquidity needs of its existing portfolio companies. This article reviews the health of Owl Rock’s business, valuation, risks, dividend safety, and concludes with our opinion about why it may be worth considering if you are a long-term income-focused investor.
Gladstone: Danger Ahead for this Popular 9.0% Yield BDC
If you count the recently declared ordinary and supplemental dividends, popular Business Development Company (“BDC”) Gladstone Investment Corp (GAIN) yields approximately 9.0%. And this is tempting to a lot of investors considering it pays monthly, the price is still down, and it appears to be in a strong liquidity position. However, GAIN’s portfolio of middle market companies is at risk of being negatively impacted by the coronavirus—more so than other BDCs. In this report, we analyze Gladstone’s business model, the coronavirus impacts, valuation, dividend safety and additional risks. We conclude with our opinion about investing.
Portfolio Tracker Tool Note
Main Street Capital: Dividend Uncertain, Upside Clear
Income investors had grown to love Main Street Capital’s (MAIN) big, safe, monthly dividend so much that its share price had risen to a dramatic premium relative to its net asset value (“NAV”). Then the coronavirus hit. The share price plunged, once loved supplemental dividends have been suspended, and even the “sacred” regular dividend is now at risk. In this report, we analyze the company’s background, impacts of the coronavirus on its business, earnings power, the dividend, valuation and risks to understand whether now is the right time to establish or add to existing positions.
Ares 12% Yield: It Sticks Out Like A Sore Thumb
Ares Capital (ARCC) is a big-dividend business development company (“BDC”) that has sold off hard during the pandemic because of its exposure to small (“middle-market”) businesses (i.e. the business than have been hit particularly hard). In this article we review the business (including important sector exposures), the balance sheet liquidity (to deal with the crisis), dividend safety, valuation and risks, and then conclude with our opinion on why this particular BDC stands out like a sore thumb.
Two (2) Preferred Stock CEFs: Big Monthly Income, On Sale
The preferred shares of many companies are now trading at attractively discounted prices as the COVID-19 pandemic has stoked fear among investors. And in many cases, this fear is unwarranted. One attractive way to play this opportunity is through closed-end funds (“CEFs”) that focus primarily on preferred stocks. This article highlights two compelling closed-end funds, offering big monthly income payments to investors (they yield 7.6% and 7.8%, respectively), and they’re currently trading at attractively discounted prices (thereby providing an opportunity for some price appreciation—in addition to big monthly income).
Triton Preferred Shares: Post-Pandemic Reality
Triton International (TRTN) is an intermodal shipping container company, and the big-yield common and preferred shares have been impacted dramatically by the worldwide COVID-19 pandemic. The company just released earnings, and gave us some important new insights. This report reviews the impacts of the economic slowdown on Triton’s business, its financial wherewithal (particularly cash), the competitive dynamics of the industry (and what might happen if Triton can weather the COVID-19 storm), valuation and risks. We conclude with our opinion about investing in the common (7% yield) and preferred (+9% yield) shares.
NuStar Preferreds Yield +15%: Real Risks, Big Rewards
NuStar Energy is a US based oil and natural gas midstream service provider. And despite the notion that its business is immune to energy price fluctuations (because of its long-term take or pay contracts) the recent crash in oil prices will inevitably have a significantly negative impact on NuStar because many of its customers are increasingly at risk of bankruptcy. In this report, we analyze the company’s business mix, income potential, its ability to meet financial obligations, and finally conclude with our opinion on whether the company’s common and preferred units offer an attractive balance between risks and rewards.
Realty Income: COVID-19 Big Loser or Big Winner? Here's Our Opinion
Realty Income, self-proclaimed “The Monthly Dividend Company,” is a revered dividend aristocrat with a 5.2% dividend yield and it has delivered for many investors for decades. But it’s still a retail REIT, and the impacts of COVID-19 social distancing are different than anything the company has experienced in the past. The shares have sold off hard, and some investors are left wondering if this a big warning or a big opportunity? This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion on investing.
Facebook: Money Printing Machine, On Sale
From time to time, we like to share attractive “Income via Growth” stocks. These are stocks that don’t necessarily pay big dividends, but they do provide the potential for diversified long-term high income from price gains (i.e. selling some of your winners to generate income). And the stock we review today is an absolute money printing machine, trading at a very compelling price thanks to the coronavirus sell off. Specifically, this company is a fast grower, with a wide moat, high margins, no debt and lots of cash. Simply put, it’s a money printing machine.
Paylocity: Attractive Business, Attractive Price, Powerful Upside
At Blue Harbinger, we make it a point to diversify our holdings across attractive opportunities among different styles and sectors. This diversification not only reduces risks, but it opens up more attractive opportunities. This article focuses on a cloud-based payroll processing company that can provide investors powerful long-term income through price appreciation. We’ve owned this stock since 2015, and believe the current market selloff makes the upside potential (i.e. income via growth) extraordinarily attractive in the quarters and years ahead.
Double-Digit Yields: Natural Gas and The Companies that Move It
The volume of natural gas demanded did not go down appreciably during the Great Recession nor the 2015 oil price crash, and it won't here either. Thus firms whose main business is moving natural gas from here to there for a fixed fee are not going to be that heavily affected. This guest article (from Darren McCammon) reviews two such companies that currently offer attractive, well covered, double digit dividend yields (we currently own one of the two). According to Mr. McCammon “these are exactly the type of firms one should be buying greedily as everyone else runs in fear.”
Omega’s 10% Yield: Is Low Private Pay Now a Strength?
The high percentage of government-subsidized tenants (i.e. Medicare and Medicaid) of Omega Healthcare Investors (OHI) is often considered to be a bad thing (because the government creates painful pricing pressure that doesn’t exist among private pay tenants). However, in light of the coronavirus crisis, government support has become more attractive, and this shift is strengthened as Omega’s Skilled Nursing Facility (SNF) industry is in a much better place (in terms of supply and demand) than it was just a few years ago. In this report, we review Omega’s asset mix, market dynamics, dividend prospects, risks, and then conclude with our opinion on investing.
PIMCO Bond CEFs: Are You Betting Against The Fed?
Many popular PIMCO closed-end funds (CEFs) have sold off particularly hard as investors fear the potential impacts of a coronavirus-driven recession. Further, large CEF premiums versus net asset values (NAVs) have evaporated into unusually large discounts as selling pressure has been intense. Further still, the price declines have been exacerbated by a drying up of liquidity in the bond markets. And even though the US Fed has dramatically increased its quantitative liquidity easing in the treasury and agency Mortgage Backed Securities (MBS) repo markets, just this week it announced that it will “be moving for the first time into corporate bonds, purchasing the investment-grade securities.” To some investors, the Fed’s essentially unlimited buying power is terrifying, and to others it is highly reassuring. Will you be betting against the Fed?
Big Monthly Dividend REIT: High E-Commerce Exposure Reduces Coronavirus Risks
This single tenant focused industrial REIT offers healthy monthly dividend payments (8.0% yield) and the potential for significant price appreciation. We believe it will benefit from the current uncertainty amid the coronavirus outbreak given its high exposure to the e-commerce sector. The trend for online shopping is a secular one but has become more prominent currently as people are forced to stay at home. We do caution that the current situation will impact the business but given its diversified portfolio and high exposure to e-commerce we expect healthy price appreciation once the situation returns to normalcy. This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion about why it’s worth considering if you are a long-term income-focused investor.
These 2 Big-Income Bond CEFs: Buy! Buy! Buy!
This is a very quick note, and it is intended to get this information to you quickly. There are currently a variety of attractive Bond CEF’s that are presenting extremely attractive buying opportunities based on their holdings, their currently discounted prices and their temporarily massive discounts to Net Asset Value (“NAV”). These particular Bond CEFs pay you income monthly (double-digit yields), we own them, and the current buying opportunity is highly attractive.
High Quality, Stable REIT: 5.6% Yield, Attractive Valuation
The recent market wide sell off has been ugly. This article focuses on a REIT that is particularly attractive considering management has been a sound steward of capital by simplifying the business model, lowering the cost of capital and growing the dividend. Further, this REIT may be poised to take advantage of current market distress thanks to its lower debt and the cushion it enjoys relative to debt covenants. If you are a long-term income-focused investor, this one is absolutely worth considering (we own it).
An Attractive Blue-Chip Healthcare REIT, Solid 5.4% Dividend Yield
This attractive blue-chip healthcare REIT offers a solid dividend and the potential for healthy long-term growth. We are impressed by its dividend history, healthy payout ratio, investment grade credit rating and significant demographic opportunity. The FFO growth outlook for 2020 is back to positive after a few years of challenges. This article reviews the health of the business, valuation, risks, dividend safety, and concludes with our opinion about why it may be worth considering if you are a long-term income-focused investor.
Powerful Upside: This “Income via Growth” Stock Is on Sale
From time-to-time, we like to write about “income via growth” stocks at Blue Harbinger. These are stocks that can provide high income to investors through long-term capital gains (i.e. selling some of your winners). We write about these types of stocks because they can bring important risk-reducing diversification to an otherwise dividend-focused investment portfolio. And we are writing about this particular opportunity because we own it, and because it is particularly attractive right now following the recent market turbulence.