These are the top 5 Business Development Companies that are publicly traded. Buying and owning these BDC companies will expose your portfolio to the world of private equity.
Private equity is when an investor or fund invests in a company that is not normally publicly available to invest in.
Buying and owning BDC’s will open your portfolio up to explode. A BDC stock will attempt to take a position in a private company after doing their own research. As such you are investing in business management professionals who oftentimes are considered experts in a small sector.
The world of Private Equity is incredibly lucrative and the following list will give you the top 5 best BDC stocks that will make you rich!
Let’s jump right in.
Ares Capital Corporation (ARCC)
ARCC 1 year chart
ARCC is a giant of a BDC company. Their market value alone is closing in on $7.5 billion. This massive market value is because of the holdings of ARCC
ARCC invests into software (15.3%), healthcare (15.2%), commercial and professional services (8.6%), investment funds (7.1%) and a slew of other private companies.
To see their portfolio: https://www.arescapitalcorp.com/portfolio
Because of this diversification Ares is considered by many to be a very good investment. Its dividend yield is close to 9% which is amazing considering that it is such a stable BDC.
Over the coming years we can expect to see ARCC continue to rise as U.S markets return to normal post pandemic. This is going to tremendously benefit ARCC.
Further, ARCC’s diversification of companies is built around small and mid cap companies whose growth will be heightened due to their small cap potential.
By investing in ARCC now you are going to get that nice 9% dividend while also growing capital. So it’s a win/win.
Owl Rock Capital (ORCC)
1 year chart on ORCC
Owl Rock Capital gives out loans to middle tier businesses.
Normally this type of business endeavor is not very lucrative unless done in massive loan sizes. Because of this many middle tier businesses have a hard time securing a good loan to upscale their business model.
Owl Rock fixes this issue by doing an extremely thorough research process on what companies they are loaning out money to. They have been incredibly successful during the pandemic. This can be seen by ORCC beating every earnings estimate this year!
ORCC’s business portfolio is massive and spread out evenly across all sectors within the United States. This indicates that ORCC has a stable ground to stand upon. For a full breakdown of their portfolio click here.
This is very unique for a BDC to do as normally they are built to have solid predictable revenue. ORCC takes this a step further by giving crazy capital appreciation along with consistent dividends.
The dividend on ORCC is 8.31% paid out on a quarterly basis! That is amazing considering your initial investment is also growing in size. Think of this as a bonus. It’s definitely a good choice!
Saratoga Investment (SAR)
1 year chart on SAR
Saratoga Investment has flown under the radar for the past two years.
SAR seeks to find companies who are failing to expand within their sector. Oftentimes this happens when a small company starts to grow but does not have the necessary connections or capital to turn into a middle market company.
SAR is incredibly good at this style of active management in companies. As such they have seen revenue growth year over year. 2021 has especially been good to SAR.
Saratoga Investment’s dividend yield is 7.51% currently. This is amazing considering the potential for capital growth along with the dividend yield.
Regarding the business portfolio. By investing in SAR you are exposing yourself to solid growth companies in the healthcare, energy, and consumer sector. It’s a rather safe portfolio that you can view in full here.
SAR’s market cap is $300 million and as such they carry a little bit more risk then the more established BDC companies. That being said, their track record so far is astounding.
Sutter Rock Capital (SSSS)
1 year chart on SSSS
Sutter Rock Capital is a new BDC having been around for less than 5 years.
Even though they are newcomers to the sector they have made waves. Analysts since the start of 2021 have been predicting that SSSS will start to trend up towards $20.
This alone presents a great investment opportunity for you to make some quick bucks. Assuming SSSS only gets close to $17 that is still a 28% increase in capital, while also obtaining a 3.38% dividend yield!
The dividend on SSSS is less than the other BDC’s on this list because Sutter is going after capital growth along with dividend yield. This is a great strategy for a company that takes such an active role in their investments.
Finally, SSSS’s portfolio of businesses is focused around high growth software companies. This means that any investment made in SSSS has a high likelihood of generating increasing wealth. For a full portfolio breakdown check out their webpage here.
Investing in SSSS could see your investment grow while also making a sizable dividend yield overtime. I wouldn’t hold too much in SSSS currently but around 5% of a BDC portfolio should be a safe bet should SSSS explode in price.
Solar Senior Capital LTD (SUNS)
1 year chart on SUNS
Solar Senior Capital is the middle market BDC arm of the larger SLR Capital Partners (SLR). SLR is a great company that decided to create a sub-division within their company to go after capital appreciation while also investing in senior secured middle market loans.
Buying and holding SUNS is a great idea as the current dividend yield is 7.41% paid out monthly! This monthly dividend is a great compounding return that you can simply have reinvested into SUNS to grow a sizable nest egg.
SUNS’s portfolio of businesses is huge. Over the past decade SUNS has invested into over 200 companies across 100 different sectors. They apply a private equity approach to managing these companies, so you know it’s the white glove treatment. For a full breakdown of their portfolio click here.
The market cap for SUNS currently is $250 million. This is expected to increase over the next couple years to a share price of $18. This share price is at pre-pandemic levels and it is reasonable that SUNS will appreciate in value up to that range.
This means that an investment today at $15.36 will net you a capital growth of 15% while also paying out a monthly dividend! That’s the best of both worlds. You will beat the normal market return of 9% while also obtaining a nice growing dividend.
Sounds good to me!
By buying and owning a slew of BDC companies you can expect to obtain a nice dividend along with appreciating capital (should you pick the right BDC). The secret here is to find BDC companies with a proven track record of both passive and active investments along with a great history of company research.
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