Business Development Companies (BDCs) are closed-end funds that invest in small and medium-sized companies that are not attractive enough to large companies. These firms are widely known for the high dividends they distribute to their shareholders. They have also outperformed the S&P 500 this year as evidenced by the performance of the VanEck BDC Income ETF (BIZD). Here are some of the best BDC income stocks.
FS KKR (NYSE: FSK) is a large BDC that is owned by KKR, one of the biggest private equity companies globally. The company provides credit solutions to private middle-market companies in the United States. It has a market cap of over $6 billion, making it one of the biggest players in the industry.
FS KKR has invested in 193 companies, with 69% of these investments being senior secured debt. The weighted average annual yeld on accruing debt is 8.3%. By sector, most of these companies are in software, capital goods, and healthcare services.
Notably, FS KKR has a high forward dividend yield of about 12%, which is substantially higher than the S&P 500 average. It is also trading at about 17% discount to net asset value, making it relatively cheap.
Owl Rock Capital
Owl Rock Capital (NYSE: ORCC) is a BDC company sponsored by Blue Owl, a leading company with over $102 billion in assets under management. ORCC has a portfolio value of over $12.8 billion and a market cap of over $5 billion.
It has invested in 157 companies, with 89% of all companies in the portfolio being senior secured. Most of the firms in this portfolio are in the internet software and services, financial services, and insurance companies. The company has a forward dividend yield of over 9% and is expected to keep growing.
Main Street Capital
Main Street Capital (NYSE: MAIN) is another BDC stock worth looking at. The company has a market cap of over $2 billion and has a safe dividend yield of 6.9%. The firm has helped over 200 companies in the US by providing them with capital that they need to run their businesses.
Some of its portfolio companies are firms like Affiliati, BlackHawk Datacom, Bridge Capital Solutions, and Career Team. Main Street is a safe company that is expected to have higher returns in the coming years.
Golub Capital BDC (NYSE: GBDC) is a BDC owned by Golub Capital, a company that has over $45 billion in assets under management. The BDC makes debt investments in the middle market across the US. 83% of its loans are first-lien traditional senior loans followed by first-lien one-stop.
In total, it has invested in 310 companies with a total fair value of over $5.1 billion. GBDC has a forward dividend yield of 9.5%.
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