When you’re a large multinational firm, you can call up an investment bank and float a bond issue. If you’re a small mom & pop business, you can go to your local bank and get funding. But for those firms that are either too big or not big enough, it can be hard to find enough capital. For lenders catering to the “middle market,” this makes it a very lucrative business.
And this includes our latest addition to our Best High-Dividend Stocks Model Portfolio.
As one of the oldest and largest lenders to middle-market companies, our pick has a long history of making loans to numerous portfolio companies. Currently, our pick has more than $2.6 billion in loans with more than 140 different companies. In addition, our pick is structured as a business development company (BDC). In exchange for tax breaks at the corporate level, it is required to hand out 90% of its cash flows back to investors as dividends. This gives our selection an incredibly high yield of nearly 10%!
Perhaps even better is that our pick’s yield is likely protected from rising interest rates. Like a regular bank, our pick makes money on its net interest margins – or the difference in its cost of borrowing vs. for what it underwrites loans. And as for those loans, 100% of its portfolio is now considered at a floating rate and is directly tied to interest rates. Under both scenarios, our pick has plenty of potential to keep its high yield in the months ahead.
You can check out the Best High Dividend Stocks Model Portfolio to explore all the stocks.
