My Favorite BDC’s – Making me Money & Doubling Every 7 Years

Concept for good investment and money making

Concept for good investment and money making

Ares Capital Corporation (ARCC) is a battle tested Business Development Company with a disciplined investment process and long-term historic performance. The company easily covers its dividend and has delivered excellent performance over the last 10 years.

In the chart below you will see the dividends paid, the current yield is 9.79%.

arcc-div

Rule of 72’s, at 9.79% yield, you will double your money in 7.25 years!

The shares have delivered excellent Total Returns over the past 10 years. ARCC returned to its shareholders 194%, almost twice outperforming the S&P 500 which returned just 98% for the period.

total-returns

So, what are BDC’s? They are companies that function like Venture Capital or Private Equity funds however they allow smaller investors like you and me to invest in their companies. VC and PE funds are often closed to all but wealthy investors. BDCs, on the other hand, allow anyone who purchases a share to participate in the open market.

BDCs have become popular since they pay little or no corporate income tax and must distribute at least 90 percent of taxable income as dividends to investors. Many BDC’s distribute 98 percent of their taxable income to avoid all corporate taxation. This results in many cases in both capital growth and high-yields. Returns to the stock holder matches the on the type of income earned by the BDC. Ordinary income to the BDC is taxable to us as ordinary income and their capital gains is generally taxable to us as capital gains.

I have a few BDC’s that have done well for me over the years.

ARCC and Main are the “Blue Chips” of the sector, and offers value for conservative dividend investors, like me who want to buy and hold for the long run. I also hold and like HZRN and HGTC.

Here are my current holdings, they represent 9% of my IRA Portfolio and their current yield.

bdc

By allocating a portion of your portfolio to some of these ultra-high-yielding investments you’ll be able to improve your cash flow while waiting for your money to double!

 

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