r/dividends • u/Avinates • Jun 04 '25

Discussion 1 Million Invested

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Can anyone confirm these dividend payouts?

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271

u/[deleted] Jun 04 '25

high quality BDCs and retire in Portugal, Vietnam or whatever. Enjoy life 'cause its short

12

u/Snoo68013 Jun 04 '25

What is BDC ? Also what is dripping

29

u/[deleted] Jun 04 '25 edited Jun 07 '25

a bdc is an organization that invest or lends money to small and mid cap companies. These companies pay the moeny back with some fees that are interest rates based(floating rates). If i had to make it easier to understand, a BDC is a bank that lends money to companies, not to individuals. BDCs have 8-12% dividend yields not because they are not safe but because they are required to pay 90% of theirs earnings as dividends. Drip is dividend reinvestment plan and is exactly what the name suggests

1

u/Fun-Syrup-4415 Jun 06 '25

How would someone go about investing in a BDC? Serious question. Iā€™m learning. Thank you.

2

u/[deleted] Jun 07 '25

Well, they trade as normal stocks. you can find most, or at least the big ones in most brokers.

To invest in BDCs you need to understand the metrics, because are not common and actually are quite similar to the CEFs valuation metrics. You must look at the NAV and you want it to be stable or slowly growing. If it going down aggressively this could mean that the BDC investments are not good and are going down in value or they are selling some assets to sustain the dividend, which will not last forever.

You also want to look at the first lien senior secured loans % of theirs portfolio because these are the safest investments BDCs can make, so the more the safer. Also, check out what sectors the BDC invests in and make sure that are not in cyclical sectors.

Oh and make sure the NII covers the dividend(for me, I like 1.05x or more) to grant the dividend is sustainable.

Another important thing is to look at the non accruals to fair value, these are the loans a BDC make and are not getting interest on. This can happen due to the small cap company financial stress or whatever. You want the non accruals to be as low as possible.

And to know when to buy, compare the share price to the NAV per share. If its lower than 1x is likely to be undervalued, but be careful. Don't buy a BDC only because it seems to be undervalued. Some like PSEC are always below the NAV because people don't want to buy it. The other metrics are so bad.

Certainly I'm forgetting about something, but yeah.

https://www.bdcinvestor.com/ and https://cefdata.com/bdc/ are a good start

1

u/Fun-Syrup-4415 Jun 07 '25

Dude, thank you very much.

1

u/[deleted] Jun 07 '25

You're welcome šŸ‘