Desperately Seeking Yield Through Equities: Part 1 - BDCs

Fixed income yields are increasingly meager and investors often hesitate to increase yields by buying longer duration fixed income securities because the long awaited increase in interest rates will (if and when it comes) would drive down the prices of those securities dramatically. Thus, we see fixed income investors huddled under the shelter of short term Treasuries, even though the 2 year Treasury yield is .44% and the 5 year is 1.63%. These are pre-tax yields and it is clear that a number of investors in these securities will see the real value of their portfolios slowly evaporate before their eyes with even limited inflation.The equity markets offer opportunities to obtain higher yields with some degree of inflation protection. For example, the dividend on the Dow Jones Utility Average is 4.18% - considerably higher than it was in 2007 when interest rates were much higher. And there was... Read more