Three BDC lenders are dangling yields above 13%, but a sky-high payout on one of them comes with a trail of red flags that most income investors miss until it is too late to get out whole.
Business development companies (BDCs) lend to midsize private businesses that are too small to tap the bond market. To avoid corporate income tax, they have to pass most of their taxable income through to shareholders, so their yields sit well above almost everything else on the income menu. In this group of three large lenders, even the lowest yield is 13.1%. A yield that high usually signals the market doubts the payout will last, so this bundle prioritizes safety. For each name, we look at how well net investment income (NII) covers the dividend,…
