"We continue to like our Business Development Companies (BDCs) since lower rates make their dividends comparatively more attractive,” says Adrian Day in The Global Analyst.
“Business development companies provide mezzanine financing, generally to smaller companies. One of our holdings in this sector is American Capital (NASDAQ: ACAS).
"The company has an aggressive business model with high growth, but has a strong balance sheet and solid fundamentals. Indeed, the stock was recently added to the S&P 500) and its European Capital subsidiary recently went public in London, boosting the parent’s value. Its current yield is 9% and the firm has ‘huge confidence’ in its dividend.
“Gladstone Capital (NASDAQ: GLAD) has an extremely conservative management; the company is run by chairman David Gladstone. This has meant slow growth, but also a strong balance sheet and portfolio. As such, Gladstone Capital is able to take advantage of opportunities if overall market declines. The stock has a current yield of 8%.
“Gladstone Investment (NASDAQ: GAIN) has the same management, and as a new company it is even less leveraged with arguably greater growth potential. The BDC has a current yield of 7.3%.”
