5 Best BDC Stocks To Buy

In this article, we discuss 5 best BDC stocks to buy now. If you want to read our detailed analysis of business development companies and their returns in the past, go directly to read 10 Best BDC Stocks To Buy. 

5. Capital Southwest Corporation (NASDAQ:CSWC)

Number of Hedge Fund Holders: 9

Capital Southwest Corporation (NASDAQ:CSWC) is an internally-managed business development company that is an active capital provider to middle-market companies in the US. The company is based in Texas. In fiscal Q2 2023, the company reported a total investment income of $26.8 million, which showed a 32% growth from the prior-year period. The company’s total investment portfolio amounted to over $1.1 billion and had $30.2 million available in cash and cash equivalents. Its strong cash position makes it one of the best stocks on our list.

Capital Southwest Corporation (NASDAQ:CSWC) currently pays a quarterly dividend of $0.52 per share and has a dividend yield of 11.98%, as of December 15. On October 27, the company also announced a supplemental dividend of $0.05 per share. It has been raising its dividends consistently for the past two years.

In December, B. Riley upgraded Capital Southwest Corporation (NASDAQ:CSWC) to Buy with a $20 price target, highlighting growth across the sector due to high-interest rates.

As of the close of Q3 2022, 9 hedge funds tracked by Insider Monkey reported owning stakes in Capital Southwest Corporation (NASDAQ:CSWC), the same as in the previous quarter. These stakes have a total value of over $26 million.

4. Barings BDC, Inc. (NYSE:BBDC)

Number of Hedge Fund Holders: 10

Barings BDC, Inc. (NYSE:BBDC) is an externally-managed business development company that makes debt investments in middle-market companies. The company started paying dividends in 2018 and has raised its payouts multiple times since then. It currently pays a quarterly dividend of $0.24 per share and has a dividend yield of 11.35%, as of December 15.

In Q3 2022, Barings BDC, Inc. (NYSE:BBDC) reported a 61% year-over-year growth in its total investment income of $56.3 million. At the end of September, the company had cash and foreign currencies of $137.3 million. In the first nine months of the year, it generated over $109.6 million in operating cash flow.

As of the close of Q3 2022, 10 hedge funds in Insider Monkey’s database owned stakes in Barings BDC, Inc. (NYSE:BBDC), compared with 11 in the previous quarter. The collective value of these stakes is over $35.5 million.

3. PennantPark Investment Corporation (NYSE:PNNT)

Number of Hedge Fund Holders: 11

PennantPark Investment Corporation (NYSE:PNNT) is a New York-based company that provides exposure to middle-market credit. On November 17, the company announced a 10% hike in its quarterly dividend to $0.165 per share. This was the company’s second consecutive quarterly dividend growth. As of December 15, the stock has a dividend yield of 11.27%.

In fiscal Q4 2022, PennantPark Investment Corporation (NYSE:PNNT) reported a total investment income of $28.9 million, which saw a 25% growth from the same period last year. The company’s investment portfolio was worth over $1.2 billion and had over $585 million in net assets.

PennantPark Investment Corporation (NYSE:PNNT) was a part of 11 hedge fund portfolios in Q3 2022, the same as in the previous quarter, as per Insider Monkey’s data. The stakes owned by these hedge funds have a total value of over $32.2 million.

2. Owl Rock Capital Corporation (NYSE:ORCC)

Number of Hedge Fund Holders: 16

Owl Rock Capital Corporation (NYSE:ORCC) is an American specialty finance and business development company. On November 2, the company announced a 6.5% increase in its quarterly dividend to $0.33 per share. The stock’s dividend yield on December 15 came in at 10.87%.

In Q3 2022, Owl Rock Capital Corporation (NYSE:ORCC) reported a total investment income of $314 million, up 16.7% from the prior-year period. At the end of September, the company had over $500 million in cash and cash equivalents.

As of the close of Q3 2022, 16 hedge funds tracked by Insider Monkey owned stakes in Owl Rock Capital Corporation (NYSE:ORCC), up from 15 in the previous quarter. The collective value of these stakes is over $52 million.

1. Ares Management Corporation (NYSE:ARES)

Number of Hedge Fund Holders: 29

Ares Management Corporation (NYSE:ARES) is an American business development company that operates in credit, private equity, and real estate markets. The company is one of the best stocks on our list as it has raised its dividends consistently for the past five years. It currently offers a quarterly dividend of $0.61 per share and has a dividend yield of 3.49%, as of December 15.

At the end of Q3 2022, 29 hedge funds tracked by Insider Monkey owned stakes in Ares Management Corporation (NYSE:ARES), compared with 30 in the previous quarter. These stakes are collectively worth over $650.4 million.

Vulcan Value Partners mentioned Ares Management Corporation (NYSE:ARES) in its Q3 2022 investor letter. Here is what the firm has to say:

“Ares Management Corporation (NYSE:ARES), is a global, diversified alternative asset manager with a focus on credit and debt funds. Among alternative asset managers, Ares has a leading market share in credit products. These credit products generate fee-related revenue, which we believe translates to stable earnings power. Ares is benefiting from increasing investor demand for private credit assets. According to industry data, the gap between current and target allocations for institutions is wider for private credit than for private equity, implying that private credit has substantial opportunity for growth. Ares has generated strong historical returns in private credit and demand from private equity sponsors, who are Ares’s primary customers, for private credit funding has increased. This has resulted in market share gains for private credit against the banks and public markets, and we believe that trend will continue. We think that scale and relationships are Ares’ most important competitive advantages and, to the extent these advantages lead to strong returns, this should lead to continued growth in AUM. The alternative asset management space is very competitive, but we believe that Ares is well positioned.”

You can also take a look at 12 Defensive Healthcare Dividend Stocks To Buy and 10 Best December Dividend Stocks to Buy

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