10 Updates

BDC Yield Hogging

Mar 14 2014, 11:02am CDT | by

Income, income, income . . . as the Fed continues to keep interest rates low, achieving a tolerable yield remains the most perplexing challenge for many who seek income. Adding to the challenge is...

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19 weeks ago

BDC Yield Hogging

Mar 14 2014, 11:02am CDT | by

Income, income, income . . . as the Fed continues to keep interest rates low, achieving a tolerable yield remains the most perplexing challenge for many who seek income.

Adding to the challenge is the likelihood that rates will eventually rise and put pressure on prices of yield-oriented securities, including BDC (business development company) MCG Capital (MCGC).

That company, as well as another BDC I like, Gladstone Investment, offer stratospheric yields; 11.3% for MCGC and 9.0% for Gladstone. As grownups, we’ve all come to understand that when something looks so irresistible on the surface, there’s probably a catch. That’s definitely so here.

BDCs invest, usually through loans, in typically small privately-owned companies that fall between the cracks when it comes to the public capital markets and the volume-oriented increasingly-skittish commercial banks. So naturally, they bear default risk, which, considering the smaller number of deals in their portfolios, can look scarier than is the case for banks, or even high-yield bond funds (the securities purchased by the latter often are issued by companies similar to those to which BDCs lend).

But there’s an upside to this.

BDCs are able to give much more attention to individual deals than is the case with banks. And BDCs, dealing as they do with private transactions, can and do work with what traders in the public markets (such as the funds) would have to avoid as inside information. BDCs typically even get board seats or observation privileges enabling them to know a lot more about their debtors. BDCs typically do most of their deal in a limited number of industries (chemicals, machinery and electronics being important for GAIN).

Also, GAIN is more likely to provide capital to support acquisitions, and to take equity (usually preferred equity) stakes. Like all income investment, rising interest rates poses a challenge. But over time, the ability of enterprises that can increase incomes and distributions (as opposed to fixed-income securities) are better able to adjust.

Another advantage of high yield (for those who can bear the fundamental risks) is the opportunity to earn “interest on interest” at escalating rates.

Special Offer: For recommendations on where to invest in 2014 from Marc Gerstein and other experts download the new free report  12 Stocks To Buy For 2014 .

Excerpted from March issue of Forbes Low Priced Stock Report .

Marc Gerstein is editor of Forbes Low Priced Stock Report and research director at Portfolio123 and author of Screening the Market (Wiley, 2002).

Source: Forbes Business

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

New Zealand All Blacks Squad Announcement
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by r ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan R ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Sela ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compe ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an al ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Ba ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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