Info on Business Development Companies (BDC)

[ESRwannabe]

In another thread someone mentioned MAIN as a good dividend stock and I see that it is a BDC. I have read other people recommending BDCs in other forums and I'm wondering if anyone has some good information on BDCs that they would like to share.

Briefly looking into them it appears to me that they are similar to REITs in that they must payout most of their revenue as dividends which then gets taxed at the marginal rate for the shareholder. I do not see anything about K-1s. So this does not look like a partnership like MLPs.

I was only able to find one ETF for BDCs. Market Vectors BDC Income ETF (BIZD). The expenses seem very high. It says that most of this is for acquired fund fees, which I'm not entirely sure what they are talking about. I also found two ETNs but I generally stay away from those. However both ETNs are with Wells Fargo which I think is one of the better banks. So I would consider using ETNs in this case.

The people on Seeking Alpha seem to agree that MAIN is the best run BDC.

 

[Free To Canoe]

Perhaps you saw this previous thread on BCDs?


http://www.early-retirement.org/forums/f44/anyone-holding-bdcs-73743.html

 

[ESRwannabe]

Perhaps you saw this previous thread on BCDs?


http://www.early-retirement.org/forums/f44/anyone-holding-bdcs-73743.html

No I missed that. Thanks!

 

[Texas Proud]

I was holding one and it was doing pretty good.....


Then one day they did not.... price went from $11 per share to the $6s... lost money even when you consider the good dividends...

Never did figure out what loan etc. they had to write down that cost me big time... so they do look good, but a mistake by mgmt can easily cost you... OH, BTW, they use leverage so if things go bad it goes bad quickly....

 

[Mulligan]

I was holding one and it was doing pretty good.....


Then one day they did not.... price went from $11 per share to the $6s... lost money even when you consider the good dividends...

Never did figure out what loan etc. they had to write down that cost me big time... so they do look good, but a mistake by mgmt can easily cost you... OH, BTW, they use leverage so if things go bad it goes bad quickly....

That is what scares me. Basically you are hoping they invest in companies that "pan out". I owned one for 6 months, collected a couple divi's and a very small cap gain and got out. I like to invest in "safer things" like monopolies.
Plus the dividends were not 15% and that was a major turnoff as I have little space in my Roth or HSA for them anyways.


Sent from my iPad using Tapatalk

 

[MooreBonds]

I have almost every single damn BDC out there (effectively, my own low-cost mutual fund . Yes, some blow up, and some are mediocre. Which is why I stay diversified. BDCs usually distribute non-qualified dividends, which is why I keep these high yielders all in tax-advantaged accounts.

A great author on SeekingAlpha who updates lists of most BDCs is Factoids. He'll post frequent articles on MLPs and BDCs. Here is a recent article with a huge list of BDCs updated with various financial metrics:

BDCs And 'The One Thing' | Seeking Alpha

 

[ESRwannabe]

Thanks that's very useful info. I did fid one CEF that invests primarily in BDCs. It is First Trust Specialty Finance (FGB). The ER is a little high, but if I invest in BDCs I probably won't buy individual BDCs. I'd probably use a ETF/ETN/CEF.