Dividends4Life: Take A Look At This 11 Percent Yielder For Income And Growth

Most income investors are familiar with business development companies, or BDCs. Business development companies are in the financing business, and essentially bankroll the operations of middle market companies by providing debt capital across the whole industry spectrum. In return for such funds, borrowers pay high interest to these business development companies, which is then passed through to shareholders as dividends. Business development companies also can make additional money by investing into the equity layers of a company, thereby potentially realizing capital gains. As a result, business development companies have a high representation in income-tilted investment portfolios, delivering reliable cash flow to their shareholders on a monthly or quarterly basis.

One business development company I think is worthy of a closer look is Gladstone Investment Corporation (NASDAQ:GAIN). And the reason for it is three-fold: 1. Steep NAV Discount, Low NII-Based Valuation, 2. High Monthly Dividend Income and 3. Interest Rate Upside. I think investors interested in high regular dividend distributions would want to take a look at Gladstone Investment, a BDC that has grown its investment portfolio and its dividend at a good clip. Importantly, Gladstone Investment is a bargain on a Net Asset Value basis, with income investors only paying 76 cents on the dollar, or ~11.0x run-rate Net Investment Income. Upside from higher rates, and an 11 percent dividend yield serve to improve Gladstone Investment's proposition as an income vehicle. Buy for income and capital appreciation.

Source: Seeking Alpha

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