THL Credit (TCRD) - is another overlooked BDC, similar to TCP Capital (TCPC) as discussed in my previous article and is considered one of the safer BDCs that has grown its portfolio in a fiscally prudent manner with a low amount of leverage, producing healthy earnings to cover its constantly growing dividend.
Business Development Companies ("BDCs") lend to small and mid-sized businesses, with limited financial leverage, paying out most of their income to investors and paying little to no corporate tax.
These are the five general criteria I use to evaluate BDCs:
- Profitability (EPS to cover dividends, NAV and EPS growth)
- Risk (diversification, portfolio quality, volatility, leverage)
- Payout (sustainable, consistent, growing)
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