Lower Fees Driving Higher Dividends: Golub Capital

Summary

  • Many BDCs have been reducing their fee structures, which has been attracting higher quality and institutional investors to the sector.
  • We recently sent out a "Buy" recommendation discussing GBDC's reduction in management fees driving increased dividends paid to shareholders.
  • GBDC now has among the lowest expense ratio in the sector, driving higher returns and likely higher stock price, which is one of the reasons I continue to hold.
  • BDCs with lower expenses can pay higher amounts to shareholders without investing in riskier assets.
  • GBDC is currently yielding over 10% compared to its investment-grade (S&P, Moody's, and Fitch) bonds/notes, which currently have yield-to-maturities of over 7%, as discussed below.
  • Looking for a portfolio of ideas like this one? Members of Sustainable Dividends get exclusive access to our subscriber-only portfolios. Learn More »

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Quick Introduction to Business Development Companies

Business development companies ("BDCs") invest shareholder capital in privately-owned, small- and medium-sized U.S. companies generating income from secured loans and capital gains from equity positions, much like venture capital or private equity funds. Anyone can invest

We are currently offering 20% off for subscriptions to Sustainable Dividends which gives you access to several features not available on the public side including the BDC Google Sheets (actionable with suggested limit orders) and the following:

This article was written by

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BDC Buzz is a professional money manager with over a decade of experience generating institutional-quality research.

He is the leader of the investing group Sustainable Dividends where he provides investors live portfolios with real-time updates, weekly BDC sector updates, company projection reports, baby bond reports, and live chat access to answer questions. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of GBDC either through stock ownership, options, or other derivatives. 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.

I have positions in 19 BDC stock positions, only one of which was discussed 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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