{"id":4271,"date":"2023-10-22T13:12:13","date_gmt":"2023-10-22T13:12:13","guid":{"rendered":"https:\/\/infundpros.com\/markets\/bdcs-put-10-private-equity-yields-in-the-working-mans-pocket\/"},"modified":"2023-10-22T13:12:15","modified_gmt":"2023-10-22T13:12:15","slug":"bdcs-put-10-private-equity-yields-in-the-working-mans-pocket","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=4271","title":{"rendered":"BDCs Put 10%+ Private Equity Yields In The Working Man\u2019s Pocket"},"content":{"rendered":"
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Let\u2019s talk income investments that are usually reserved for rich folks: deal-making private-equity (PE) funds!<\/p>\n

Usually there\u2019s a sizable fee to get into PE. Unless you know the secret knock at the back-door entrance, which is more our<\/em> style anyway.<\/p>\n

I\u2019m talking about yields from 7% all the way up to 11%. With a cover charge as low as $15!<\/p>\n

These business development companies (BDCs) exist thanks to a perfectly legal loophole that lets anyone with an IRA or brokerage account tap into not just one or two private-market companies, but dozens at a time. Instead of shelling out hundreds of thousands of dollars to hit a PE fund\u2019s minimum buy-in, this access typically starts at about $15 to $20 per share<\/em>.<\/p>\n

And best of all? These PE-esque stocks routinely<\/em> deliver high-single and even double-digit yields. In fact, the trio of BDCs I\u2019m about to break down pay out between 7.7% and 11.1%<\/em> at current prices.<\/p>\n

BDCs are rare birds. The industry represents just a meager sliver of the market. Currently, we have only a few dozen BDCs that trade on the public markets, and even the largest among them are pretty puny compared to the financial media\u2019s favorite blue-chip topics.<\/p>\n

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Granted, it\u2019s a tough business! Business development companies provide small- and midsized companies with much-needed financing\u2014financing that was so difficult to come by, decades ago, that Congress legislated BDCs into existence for just that purpose.<\/p>\n

Congress built BDCs much like they built real estate investment trusts (REITs). They provided them with ample tax advantages\u2014under the condition that they pay out at least 90% of their taxable income as dividends.<\/p>\n

And if you thought REIT dividends were big, well:<\/p>\n

That said, double-digit yields aren\u2019t a \u201cgimme\u201d investment. Those big, regular checks sometimes come complete with big risks\u2014so much so with BDCs that I refuse to own them through diversified funds.<\/p>\n

The only way to buy BDCs is to pick the best and discard the rest.<\/p>\n

Let me show you. Three BDCs yielding 7.7% to 11.1% have recently popped up on my radar\u2014and they illustrate why some people loathe them, while others love them.<\/p>\n

Sixth Street Specialty Lending (TSLX)<\/strong><\/p>\n

Dividend Yield: <\/strong>10.2%<\/p>\n

I want to start with Sixth Street Specialty Lending (TSLX)<\/strong>\u2014a BDC that I frequently have my eye on because of its sterling dividend stewardship.<\/p>\n

Sixth Street will do investments of all kinds\u2014senior secured loans, mezzanine debt, non-control structured equity, common equity\u2014in middle-market companies. A quick look at its typical deal:<\/p>\n