Small business lenders that trade publicly are offering payouts between 10.5% and 13%, making them an attractive option for investors looking to collect big checks. These companies, known as business development companies (BDCs), provide financing solutions to small businesses that may not have access to traditional bank loans. They trade on public exchanges and offer dividends comparable to high-yield funds.
One example of a BDC is Prospect Capital, which currently has a dividend yield of 13%. Despite trading at a deep discount to its net asset value, Prospect Capital has a history of dividend cuts and underperformance compared to its peers. Investors should proceed with caution when considering this stock, as it will need to demonstrate long-term positive performance to prove its value.
Barings BDC, with a dividend yield of 10.5%, offers a more promising opportunity in the BDC space. Previously known as Triangle Capital, Barings has undergone a successful transformation led by global financial services firm Barings. The company primarily invests in senior secured private debt in well-established middle-market companies and has a high-credit-quality portfolio with consistent dividend coverage.
Blue Owl Capital III, a newer BDC under the umbrella of Blue Owl Capital, offers a dividend yield of 9.4%. Despite its short trading life, Blue Owl Capital III has shown strong credit quality with the lowest percentage of non-accruals compared to its peers. The company’s dividend situation is also stable, with regular quarterly dividends and a series of special dividends planned through 2025.
Investors should be aware of potential challenges when considering Blue Owl Capital III, including higher management fees following its transition to a public company and upcoming lock-up expirations that could lead to selling pressure. However, with a strong portfolio and experienced management team, Blue Owl Capital III remains a solid option for investors seeking high dividends from small business lenders.
Overall, small business lenders trading publicly as BDCs offer investors an opportunity to collect significant dividends while supporting the growth of small businesses. With attractive payouts ranging from 10.5% to 13%, these companies provide a unique investment option for those seeking high-yield opportunities in the market. As always, investors should conduct thorough research and consider the potential risks before investing in any specific BDC.
