ARCC - Blue Owl Capital Stock: 5 Reasons Why It's Retiree-Friendly With A 9.5% Yield
2024-02-18 18:00:00 ET
Summary
- Retirees benefit from sustainable high dividend yields as they reduce the sequence of returns risk and also can enhance a retiree's lifestyle.
- Blue Owl Capital Corporation offers a retiree-friendly dividend yield of 9.5%.
- We examine five reasons why.
- We also look at two big headwinds facing the BDC sector this year and why OBDC is better positioned than most of its peers to face these risks.
Retirees more than anyone benefit from high sustainable yields. The reasons for this are clear:
- While the stock market tends to be unpredictable over short to medium periods and can at times be extremely volatile, dividend payments tend to be quite dependable with market volatility seldom having an impact on the cash distributions of quality businesses with defensive positioning and strong balance sheets. This is important because it reduces the sequence or returns risk for retirees. If you do not need to tap into your investments to meet living expenses for many years to come, volatility is relatively meaningless. However, if you are retired and counting on passive income from your portfolio to survive for an extended period of time, market volatility can significantly impact your retirement plans. However, if you remove the need to actually sell shares of stock on a consistent basis and instead just live off of the dividend income that your portfolio generates, market volatility then means little to nothing to retirees similar to non-retirees.
- It then stands to reason that a high yield - that perhaps does not grow as fast - is much more useful to a retiree than a lower yield that comes with more dividend growth. This is because retirees have a much greater need for cash flow today and have less of a need for rapidly increasing cash flow down the road since they are living off of their savings now. This is why fixed-income funds and high-yield stocks are generally much more attractive to retirees than lower-yielding dividend growth funds ( VIG )( SCHD ).