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7.6% Dividend Yield From This Sleep Well Best Of Breed BDC


  • S&P recently expressed concerns about BDCs seeking to reduce asset coverage ratios and will be revising ratings "in the coming months as each BDC's leverage and strategic plans become clearer".
  • MAIN is well-positioned and already has access to higher leverage without the need to seek approval. MAIN will benefit due to greater flexibility meeting the qualified asset requirement.
  • MAIN's portfolio yield has started to rise and will likely continue as LIBOR hits new highs, increasing NII per share as shown in this article.
  • On March 1, 2018, MAIN announced the redemption of its higher cost 6.125% Baby Bond reducing annual interest expense by $2.7 million, and I have included in the updated projections.
  • Net interest margins, distributable NII, and dividends per share continue to increase as LIBOR rises while lowering expenses. Insiders continue to actively purchase shares and now have around $130 million.

Quick BDC Market Update

As discussed earlier this week in "3 Largest Business Development Companies Take Steps To Increase Returns To Shareholders":

"Over the last few days, the largest business development companies ("BDCs") have released SEC filings showing that their Boards are seeking to take advantage of the recently relaxed regulations for the sector. I believe that this sends a strong message and the other ~40 BDCs will likely follow suit over the coming weeks."

In the article, I discussed S&P Global Ratings of PSEC of BBB- with a negative outlook with the potential lower the ratings if:

  • Reported debt to equity rises to 0.85x or higher, and we do not expect leverage to decline below 0.85x on a sustainable basis in the near term; or
  • The investment portfolio's performance deteriorates, as indicated by rising realized and/or unrealized losses or nonaccruals.

Yesterday, S&P Global Ratings placed the 3 BDCs mentioned in the article on CreditWatch with negative implications:

  • Prospect Capital Corp. (PSEC)
  • Ares Capital Corp. (ARCC)
  • FS Investment Corp. (FSIC)

Also, S&P affirmed issuer credit ratings but revised its outlooks to negative:

  • Corporate Capital Trust (CCT)
  • Goldman Sachs BDC Inc. (GSBD)
  • Hercules Capital Inc. (HTGC)
  • Main Street Capital Corp. (NYSE:MAIN)
  • Oaktree Specialty Lending Corp. (OCSL)
  • Solar Capital Ltd. (SLRC)
  • TCP Capital Corp. (TCPC)
  • TPG Specialty Lending Inc. (TSLX)

And, affirmed issuer credit ratings with outlooks that remain negative:

  • Apollo Investment Corp. (AINV)
  • BlackRock Capital Investment Corp. (BKCC)
  • PennantPark Investment Corp. (PNNT)

I shared my opinions of the temporary downgrade by S&P in "S&P Global Ratings Update For BDCs", and it should be noted that most BDC stock prices were up yesterday after the announcement

BDC Buzz Articles Update

As mentioned in "BDC Buzz Begins Purchases Of Higher Quality BDCs," I have recently been buying additional

The information in this article was previously made available to subscribers of Sustainable Dividends, along with:

  • Target prices and buying points
  • Real-time changes to my personal BDC positions
  • Updated rankings and risk profile
  • Real-time announcement of changes to dividend coverage and worst-case scenarios
  • Suggested BDC portfolio

This article was written by

BDC Buzz profile picture
Build a portfolio with sustainable dividend yields ranging from 8% to 12%

I work with and for various private wealth managers, institutional and accredited investors. My goal for articles on Seeking Alpha is to bring exposure to business development companies (BDCs) that finance small to medium-sized businesses, typically overlooked by banks. BDCs are an instrument for investors to earn healthy dividends by avoiding double taxation at the corporate level and allowing income to flow directly to shareholders. Please see website link below for more information.

Email: buzz@bdcbuzz.com

Website: www.bdcbuzz.com

Newsletter: www.bdcbuzz.com/contact.html

Analyst’s Disclosure: I am/we are long MAIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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