2 Big Yields (up to 20.9%) That Are Traps Set to Spring (and a 9% Payer That Isn’t)

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2 Big Yields (up to 20.9%) That Are Traps Set to Spring (and a 9% Payer That Isn’t)

The bankruptcy of auto-parts supplier First Brands has hit a corner of the market known for high dividends. Does that make these assets bargains?

Maybe. But we need to be careful here, and avoid making the mistake of “reaching for yield”: that is, buying yields that are high for a reason: the stock price has plunged.

But I’m getting ahead of myself. The corner of the market I’m talking about is business development companies (BDCs), which loan money to small- and mid-sized firms.

Investors first got worried about BDCs a couple months ago, when the First Brands story broke. The news raised alarm about the private-credit market (where BDCs operate).… Read more

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Will the Fed Really Wreck These 10%-Plus Payers?

Wall Street suits tend to avoid business development companies (BDCs). That’s a mistake. For us income seekers, these “Main Street bankers” can be the best dividend machines in the market.

Forget the “penny yields” most stocks pay. BDCs can dish divvies between 10.6% and 12.6%. Unlike vanilla blue chips, BDCs are mandated by Congress to flip us at least 90% of their taxable income.

In other words, the dividends are a “built in” feature.

Of course we don’t just close our eyes and buy any 12% payer. Some BDCs are dividend machines, others are disasters. Our job: separate the stars from the scrubs and only buy the cash cows.… Read more

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Trump 2.0 is Bullish for BDCs: 7 Yielding Up to 14%

Trump 2.0 will feature Wall Street-approved suit Scott Bessent as Treasury secretary. Bessent will advocate for financial deregulation and increased lending. Easier and faster money. Which will be a boon for private equity (PE) firms and business development companies (BDCs).

Today we’ll discuss seven BDCs yielding between 11.1% and 14.2%. They operate like PE shops—both will benefit from a friendly deal-making environment.

For our income investing purposes, we pick BDCs because it is easier to buy them.

We can buy BDCs individually as we would any stock. And BDCs can avoid taxes at the federal level by paying out at least 90% of their taxable earnings to shareholders in the form of dividends.… Read more

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Invest Like the “Smart Money” (And Get Paid 12.4% To Do So)

This retirement portfolio pays 12.4%. Which means, on a million-dollar stake, these stocks dish $124,000 in dividend income alone.

That’s fantastic, needless to say! But are these stocks safe enough to actually retire on?

After all, we’re not looking to collect a 12.4% yield and lose it in price. Heck, we’re not interested in losing capital at all. We want the 12.4% with stocks that are at least steady.

Most common stocks would be in trouble if they paid 12.4%. But these are business development companies (BDCs), which yield so much because they have a special carve out from Uncle Sam.… Read more

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