SBUX - Why I Think BDCs Will Become Even Better Long-Term Investments

2024-06-14 10:00:00 ET

Summary

• Some BDCs have performed well during high interest rate environment, while some have shown cracks in their fundamentals.
• However, BDCs will likely benefit over the longer term from banks' tighter lending standards post-2023 banking crisis.
• BDCs with strong fundamentals and management likely to continue growing in the long-term, with their share prices rewarding investors with nice capital appreciation.
• BDCs who've successfully navigated the high interest rate environment could potentially be seen as more than short-term, high-yielding investments.
• While I do anticipate BDC share prices could potentially pull back once interest rates decline, they may not pull back to their historical levels as a result of investors preferring to continue investing in the sector.

Introduction

As an investor solely focused on dividends, business development companies always piqued my interest as income vehicles. And while they are considered riskier, I think the current macro environment has made them even better long-term investments....

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