8% Yield, 21% Discount, Steady Dividends

We continue to cover Business Development Companies, known as BDCs, in our recent articles in 2022. In the low yield environment, BDCs emerged in 2021 as an increasingly popular choice for income investors searching for attractive yields. BDCs offer retail investors exposure to privately-held firms, which often are also funded by venture capital firms. BDCs got walloped in the COVID Crash of 2020, due to uncertainty as to how their portfolio companies would handle the altered environment of lockdowns and sheltering in place.

As it happens, the majority of them did well, with their holdings weathering the storm, which became increasingly evident as earnings reports rolled in. Prospect Capital (PSEC) is one of the largest BDCs in the market, among the top 5 market caps for the industry. PSEC's non-accruals have steadily improved over the past 6 quarters, declining from 0.9% of assets in Q2 '20 to 0.4% in Q4 '21. Founded in 2004, NY-based Prospect Capital (PSEC) provides private debt and private equity to middle-market companies in the US, with a focus on sponsor-backed transactions and direct lending to established owner-operated companies.

Source: Seeking Alpha

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