Top dividend yield idea?

[Ghibli]

@Sweep_the_Leg

@Palantir

Yeah but why does it matter if the BDC doesn’t need to access the capital markets? It’s bad for the BDC sponsor, but why is it bad for the BDC investor?

For the individual investor, it may not be. So far I’ve been responding with the sponsor in mind, not the investor. If I went to a financial advisor that tried to sell me on BDCs, that’d be a huge red flag. I’d move on to the next guy.

Always a red flag if a FA tries to “sell” anything. There are BDCs that are nothing more than a levered CEF. Some BDCs own mostly bits of private companies instead of public companies. Again, a BDC is just a legal structure, not a specific investment strategy. There are even some that are investment grade. Condemning BDCs as a whole would be like condeming all CEFs or all mutual funds. Doesn’t make sense. And the best thing that could happen for investors in some BDCs is liquidation, so, no, open credit markets are not a requirement for a BDC investor to be successful.

[Ghibli]

@rawraw

@Ghibli

Everything thing STL mentioned is from a distribution and sales perspective. BDCs, like REITs, are just a regulatory structure that was intended to make it easier for smaller companies to raise money. Their leverage is limited to 2/1, much less than REITs, and all sorts of disclosure is required. Lots of level 3 valuations, but always done by an independent party. The assets they hold vary widely from BDC to BDC. They are no more an asset class than ETFs. Advisors making bank selling these things is a product of the distribution channels and its minions. There is nothing wrong with the BDC structure itself. Yes, some have high management fees and some have bad actors, like anything else. It takes a little bit of knowledge to navigate. For starters, never buy on the primary market, never buy above book value, and always require a higher discount given higher fees, which vary substantially. I don’t know why I bother to share. The more misinformation out there, the more I bank. And given the low liquidity, the prices get pushed around by rumor mongers and those with a little cash. All that means is more opportunity. BDCs as a class have recovered a bit, but they had been at record lows relative to book value. STL just might be the ultimate contrarian indicator, the perennial sales guy. I picked up a couple earlier in the year at a 40% discount to book. That has closed substantially. And just a warning, this is a very illiquid market. I’m not a big player by any stretch and it can take months for me to take a position without significantly moving the price. You’re welcome.

But REITs aren’t taking credit risk. Either you don’t understand why this is important or you are just not highlighting it in your example. In my experience, the market doesn’t care about credit until it is too late. I’m not interested in investing in something for 3 months, so I’m concerned about how they perform over a full cycle and not January - April of 2016. And you still haven’t addressed my hangup, although I’ve admitted I don’t know much about the BDC structure. I assume since the OP is looking for dividends, he is also looking for longer term holdings. BDC may be the best option for him, but I’m not convinced.

But I thank the omniscient God of BDCs took the time to write a condescending reply on the thread. Us mortals appreciate your presence and it has strengthened my faith. Halleajulah

Do those penis enlargement pills actually work?

[Palantir]

@Sweep_the_Leg

@Palantir

Yeah but why does it matter if the BDC doesn’t need to access the capital markets? It’s bad for the BDC sponsor, but why is it bad for the BDC investor?

For the individual investor, it may not be. So far I’ve been responding with the sponsor in mind, not the investor. If I went to a financial advisor that tried to sell me on BDCs, that’d be a huge red flag. I’d move on to the next guy.

Yeah, but this discussion has been about the investor, not the sponsor…

[Sweep_the_Leg]

@Palantir

@Sweep_the_Leg

@Palantir

Yeah but why does it matter if the BDC doesn’t need to access the capital markets? It’s bad for the BDC sponsor, but why is it bad for the BDC investor?

For the individual investor, it may not be. So far I’ve been responding with the sponsor in mind, not the investor. If I went to a financial advisor that tried to sell me on BDCs, that’d be a huge red flag. I’d move on to the next guy.

Yeah, but this discussion has been about the investor, not the sponsor…

I went down this path in response to BValGuy’s question directed at me. That was an industry related question, not about the investor. Even still, knowing that a product may be in secular decline (and we can debate if BDCs are; obviously I think so) does impact current and future investors.

[Would_You_Look_at_Th]

@igor555

SO

I’m sitting out on this one for now… there’s a lot of regulatory uncertainty in regards to cost overruns on the Vogtle nuclear unit in Mississippi and Georgia. Not sure if I like the AGL acquisition at the agreed price, either.

[BarbaraArnold17]

HCP Inc (a REIT) is yielding 6.6%… pretty attractive. Does anyone know the risk?

[frisian]

Jeez, I’m feeling like an idiot today. I had to look up what a BDC was.

[brain_wash_your_face]

I’ve picked up some closed end funds in secondary market and its been profitable. CEF are a decent discounts and I know some of the managers and what they own. Some of them (shocking!) even eat their own cooking, which is much more attractive when you don’t pay the up-front commission and you know what you own.

I consider CEF to be one of the least efficient areas in the U.S. from a risk adjusted perspective (micro cap/pink sheets may be less efficient, but not less risky). However, some of the best opportunities in CEF are thin and not appropriate for a fund unless you are comfortable take three months to build a 6mm position. I will buy them one off in my PA though.

[XinChow88]

This thread is getting over my head haha

[hpracing007]

What is a BDC? Business Development Center?

[BValGuy]

Business Development Company - provides debt and equity capital to lower middle market companies (mostly private businesses).

[igor555]

@Palantir

Also, I like OKE and PAGP. You could make a case for their LPs, namely OKS and PAA, but given the yield spread is so small, I like being on the side of the insiders.

For BDCs, if they experience credit events, and have to lower distribution, wouldn’t that already be priced in? STL’s point is about the distribution system, but if it is a closed end company, why does that matter to the internal workings?

+1

TRGP^

[Palantir]

^Hell yeah. Went heavily into OKE, PAGP, and TRGP a few months ago, and they’ve basically erased my losses from SUNE.

[bchad]

@hpracing007

What is a BDC? Business Development Center?

I thought it was just a BSD, but in Cyrillic.

[igor555]

^yea if you are dyslexik

[wankerbanker]

why not buy an idex of high dividend yielding stocks… does anyone know the best divided ETF?

[system]

@XinChow88

What’s your top pick for a high dividend yield stock?

Stay out of the United States obviously, no yields worth mentioning.

I picked up a portfolio of 6-9% yielders last year in China A-shares. Yields have come down, but for example ICBC is trading at 6.5% right now.

Yesterday picked up RBS.PRF at 7.7%. Would like some BCS.PRD at 8.1% if I can get it. Obviously UK banks are the place to be, unless you actually think it is the end of the world.

Anything under 5% isn’t worth my time.