Sun Sep 15 14:04:00 UTC 2024: ## Business Development Companies: A “Rich Guy Loophole” for Big Dividends?

**Investors seeking high yields may want to look beyond the traditional realm of REITs and consider Business Development Companies (BDCs), according to investment strategist Brett Owens.** BDCs, similar to REITs, are companies mandated by Congress to pay out at least 90% of their taxable income as dividends. This structure can lead to hefty payouts, with some BDCs yielding upwards of 12.5%.

**Owens highlights three BDCs worth exploring:**

* **SLR Investment (SLRC):** This company invests primarily in senior secured loans to middle-market U.S. companies, boasting a diversified portfolio across 800 unique issuers and 110 industries. SLRC trades at a 14% discount to its net asset value (NAV) and offers a 10.5% yield. While the company’s fixed-rate portfolio could benefit from falling interest rates, some concerns remain regarding its external management fees and its lagging performance compared to industry ETFs.
* **Nuveen Churchill Direct Lending Corp. (NCDL):** This relatively new BDC, backed by the financial powerhouses Nuveen and TIAA, focuses on senior secured loans to private equity-owned middle market companies. While its track record is still developing, NCDL’s strong backing and its commitment to first-lien loans make it an interesting prospect for investors.
* **Crescent Capital BDC (CCAP):** This established BDC, with a track record dating back to 2015, has a penchant for special dividends. Its portfolio, heavily invested in first-lien debt to non-cyclical companies, is considered quite defensive. CCAP recently acquired First Eagle Alternative Capital (FCRD), propelling its earnings growth. Despite a halt in special dividends, CCAP has resumed these payouts, boasting a 9.3% yield on regular dividends and an impressive 11.5% when including special dividends. However, the company’s heavy reliance on floating-rate debt could pose a challenge if interest rates begin to decline.

**Owens cautions that high yields often come with higher risks.** Investors should carefully evaluate each BDC’s performance, management fees, and investment strategy before making any investment decisions.

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