BDCs Still Offer Price Appreciation Potential for Dividend Stock Investors

An examination of the charts of many Business Development Companies (BDCs) reveals enormous price appreciation since March 2009. The industry had a near-death experience as Allied Capital (AFC) was subjected to a widely publicized short attack and many BDCs had to write down assets and as a result got into ratio problems and covenant violation problems with lenders. Fortunately, no BDCs actually went into chapter 11. There were a couple of takeovers and there have been some secondary offerings at less than book value, but investors with patience have been generously rewarded. It is not hard to find examples of BDCs that are up more than 500% from the early 2009 bottom. American Capital, Ltd. (ACAS) and MCG Capital Corporation (MCGC) are two that come to mind. Most BDCs are generating attractive yields but are also trading at or above book value. I am now often asked the questions whether... Read more