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Interest rates should remain historically low in 2013. This poses challenges for income investors. However, low rates should be beneficial to business development companies (BDCs) that frequently access the debt markets to raise funds. 2013 also is predicted to have slow but positive GDP growth of around 2%. This should be positive for M&A activity as larger firms try to acquire growth they cannot accelerate sufficiently organically. Here are two high yielding BDCs that have solid valuations in addition to recent insider buying.

Compass Diversified Holdings (NYSE:CODI) is a public investment firm specializing in acquiring controlling stakes in small to middle market companies. The firm seeks to make middle market and buyout investments.

4 reasons CODI is a good pick up for an income investor at $15 a share:

  1. Myriad insiders have purchased almost 100,000 shares over the last few months.
  2. CODI yields more than nine percent (9.4%) and importantly did not have to cut its dividend even in the depth of the financial crisis.
  3. The firm has crushed earnings estimates each of the last three quarters. The average beat over consensus has been 30% over that time span.
  4. Consensus earnings estimates for both FY2012 and FY2013 have ticked up over the past three months and CODI sells for just 9.5x forward earnings. It also is priced a very reasonable five year projected PEG (1.29) for such a high yielder.

Prospect Capital Corporation (NASDAQ:PSEC) is a business development company. It is a private equity firm specializing in late venture, middle market, mature, mezzanine finance, buyouts, recapitalizations, acquisitions, growth capital, development, cash flow term loans, and bridge transactions.

4 reasons PSEC is a good income pick at $11 a share:

  1. Several insiders have bought over 50,000 shares since Mid-November.
  2. PSEC yields almost twelve percent (11.7%). It is also selling at just over 7x trailing earnings.
  3. Consensus earnings estimates for both FY2012 and FY2013 have moved up over the last few months and the company has beat earnings estimates each of the last two quarters.
  4. Prospect posted revenue growth of better than 50% in 2012 and analysts believe another 15% gain is in store for FY2013.
Source: Insiders Are Buying These 2 Unconventional High Yielders