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Why An Investment In Barings BDC Represents A Brilliant Risk And Reward Opportunity

Apr. 02, 2021 8:22 AM ETBarings BDC Inc (BBDC)3 Comments
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  • The company had an overly conservative investment mix which changed after the merger with MVC Capital.
  • Although there are highest risks associated with MVC's lower-tier loans, credit support agreement and share repurchase plan serve to offset much of the downside risk.
  • The company grew its dividend by double-digit numbers during the last three years.
  • We believe that the combination of higher-yield investments with the current management actions will create value for the company's shareholders.

Hand putting print screen dart and target board wooden cube on up arrows. Target of investment and business concept.
Photo by Dilok Klaisataporn/iStock via Getty Images

I don't know if we have said this in another article as well, but sometimes we are too focused in the REIT sector that we forget about BDCs, which offer a nice capital and income

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Comments (3)

I'm a BBDC shareholder pretty much because of the risk/reward ratio.

I don't expect BBDC to finish in the top 5-10 BDC's in terms of total return in 2021, but I think they will continue to raise the dividend in 2021 and close the gap in the discount to NAV.

There' not much value to be found in the sector right now and I like the realistic expectation of some upside here and think if the downside potential is more limited here than with most other BDC's.

If I was buying my first BDC at this time, they wouldn't be my top pick, and they are far from my largest position, but the manager has done a good job so far and with the risk/reward as I see it, they have a place in my portfolio.
If I were going to consider BDCs on the basis of yield here and now I would buy TSLX for far superior long term income growth and capital growth. Present yield of TSLX slightly higher than BBDC. This is TSLX's base case dividend and includes no supplemental dividends from TSLX which is highly unlikely.
@Brucejfern Not sure if it's a good idea to hold any BDCs at this point of the cycle. The recovery from last year's crash has been breath-taking. Bargains are fewer and far between.
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