2024-02-02 00:28:23 ET
Summary
- Many investors are seeking high-yielding stocks and bonds, leading to the popularity of ultra-high yield investments, which can have hidden risks.
- business development companies are attractive due to high yields and often below 1X beta levels.
- PennantPark Floating Rate Capital, a popular BDC, has had solid returns but experienced a significant loss in 2020, highlighting the risks involved.
- PFLT's leverage today is lower than in 2020, while interest rates are higher, potentially improving its risk-reward profile compared to then.
- PFLT is still trading at a slight premium to its tangible book value, so it may be best to wait for a correction before buying, particularly given broader stock market risks.
Today, many investors are looking for very high-yielding stocks and bonds. Ultra-high-yield investments are prevalent today due to the growing number of retired individual investors. Over the past decade, there has been a solid trend toward high stock ownership among older Americans as the traditional conservative retirement investing strategies are undone. On the one hand, this approach increases monthly income and overall returns. However, investors, particularly those looking to maintain their capital over a long time horizon, should understand the risks in many high-divided equities....
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For further details see:
PennantPark Floating Rate Capital: One Of My Favorite BDCs, But Market Liquidity Risks Rising