EVF - BSL And Floating Rate Funds: Rising Dividends 9-11% Yields 10% Discounts

Summary

• BSL yields 9.53% and pays monthly. Management has raised the monthly dividends three times in the past five months.
• BSL and some other floating rate funds are selling at deeper than historic discounts, even though they're raising the monthly distributions.
• We compare BSL to two other floating rate funds for yield, dividend hikes NAV discounts, performance, and holdings quality.

Are rising rates cramping your style? If you're looking for a near-term play on rising rates, this article covers Blackstone Senior Floating Rate Term Fund ( BSL ) and two other CEFs, Eaton Vance Senior Income Trust ( EVF ), and Nuveen Floating Rate Income Fund (JFR), all of which have raised their monthly distributions over the past several months.

Fund Profiles:

BSL's main objective is to seek high current income, with a secondary objective to seek preservation of capital, consistent with its primary goal of high current income. Under normal market conditions, the fund invests at least 80% of its Managed Assets in senior, secured floating rate loans. BSL has a limited term, and absent shareholder approval to extend the life of the Fund, the Fund will dissolve on or about May 31, 2027. (BSL site)

EVF seeks a high level of current income consistent with preservation of capital. The Fund pursues its objective by investing at least 80% of its total assets in senior, floating rate loans by domestic or foreign borrowers, so long as foreign loans are U.S. dollar denominated and payments of interest and repayments are made in U.S. dollars. (EVF site)

JFR seeks to achieve a high level of current income by investing in a portfolio of adjustable rate senior loans and other debt instruments. At least 80% of its managed assets will consist of adjustable rate loans; at least 65% of these must be senior loans secured by specific collateral. (JFR site)

BSL is the newest fund, debuting in May 2010, vs. a May 2004 start date for JFR, and an October 1998 IPO for EVF.

All three funds use leverage, with BSL at 36.61%, JFR at 38.66%, and EVF at 38.03%. Their expense ratios are also similar, ranging from 2.17% for JFR, to 2.36% for BSL, to 2.38% for EVF.

JFR has the largest amount of holdings, at 484, similar to BSL, which has 469, while JFR has by far the highest average daily volume, 203K, vs. 61K for BSL and 49K for EVF.

Dividends:

All three funds pay monthly distributions, and have raised their payouts over the past several months. BSL raised in June, September, and December 2022:

EVF made five consecutive hikes in May-September '22, and raised again in November and December:

JFR raised in August '22, paid a special distribution in December '22, and raised again for its February payout:

At their 01/05/23 closing prices, The three funds' dividend yields are 9.53% for BSL, 11.41% for EVF, and 11.02% for JFR. BSL should go ex-dividend next on ~2/17/23, while EVF and JFR should both go ex-dividend on ~1/12/23.

EVF is the clear winner for dividend growth, with a five-year dividend growth rate 7.72%, vs. -5% for BSL, and -0.7% for JFR:

Holdings:

BSL had an overall 94% exposure to 1-7 year maturities, dominated by a 52.5% position in 5-7 year holdings, as of 10/31/22.

BSL's top 10 holdings are all below 1% of its total portfolio, and 94% of its holdings were floating rate. Beleaguered cinema owner AMC is one of its top-10 holdings. BSL's top 10 equals ~10% of its portfolio.

Similar to BSL, EVF's main maturities exposure are 1-7 years, at ~86%. However, it also has a limited 5% exposure to 7-10 year holdings.

EVF's top 10 holdings include more well-known names, such as Citgo, its top position, at 1.43%, and Uber, at ~1%. EVF's top 10 equals ~11% of its portfolio.

JFR has a ~90% exposure to 1-7 year maturities, with its 3-5 year and 5-7 year holdings roughly similar, at ~35% and 38%, respectively.

JFR's top holding is includes Restaurant Brands, the owner of Burger King and other fast food chains, at 2.41%, and Caesar's Holdings, at 1%. Its top 10 equals ~12% of its portfolio.

Performance:

BSL has had the lowest price returns over the past 1-, 3-, 5-, and 10-year periods. Its 1-year NAV return also lags EVF and JFR, whereas its 3- and 5-year NAV returns are a bit better, and its 10-year NAV return of 3.59% is slightly lower:

Valuations:

Buying CEF's like UTG at a deeper discount than its historical average discounts/premiums ca be a useful strategy, due to mean reversion.

CEFs' daily NAV/share valuations are calculated after the market close.

As of the 1/4/23 close, BSL was trading a -10.19% discount to NAV, a much deeper discount than its 1-, 3-, and 5-year discounts of -7%, -6.4%, and -3.9%, respectively.

EVF and JFR were also trading at over -10% discounts that were deeper than their 1-, 3-, and 5-year average discounts, but the spread wasn't quite as deep as BSL's.

Parting Thoughts:

Judging by their low price and NAV returns over the past several years, these three funds aren't exactly in the "set it and forget it" category.

However, if you're nimble enough, you may be able to profit from them for awhile in 2023, while the Fed is still raising rates - it appears that they're in an upswing period for dividends, which isn't always the case.

While BSL has lagged the other two funds over the past six months and year, it has been performing the best most recently, outperforming the market over the past trading month. BSL and EVF are both less than 3% above their 52-week lows.

All tables furnished by Hidden Dividend Stocks Plus, unless otherwise noted.

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