Will Rate Cuts Hurt BDC’s? (9.5% Yield)

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Business Development Companies (BDC's) have delivered fantastic returns recently. Part of the reason for their performance is their ability to lend at high variable interest rates. Today's episode looks at the likely effect of Interest Rate Cuts on BDC's. We'll also look at what happened to BDC's the last time interest rates were cut (in 2019), and a couple of BDC funds: BIZD and PBDC. If you like high yield dividend investing, I hope you enjoy this look at the effect of Interest Rate Cuts on BDC's.

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PBDC (BDC Fund) Analysis Article by Juan:

BDC Fee Explanation:
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Timestamps:
00:00 Introduction
00:55 Concerns over the effects of interest rate cuts on BDC's
02:41 Effects of Rate Cuts on BDC's #1: Reduced Income
03:04 Effects of Rate Cuts on BDC's #2: Fewer Defaults
03:26 Effects of Rate Cuts on BDC's #3: More Loan Volume
03:41 Effects of Rate Cuts on BDC's #4: Equity Return Upside
04:31 What happened to BDC's last time interest rates were cut?
07:05 BDC or BDC Fund? A look at BIZD vs PBDC
09:00 BDC Fees, and the confusion around crazy high BDC fees
10:18 My Take
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Snowball Dividend Tracker (Create a Free Account, and the 10% Discount will appear under "Subscribe"):

armchairincomechannel

Great video brother. I appreciate how you put things in layman’s terms and answer questions regularly investors would have. Keep up the good work.

ToddPatty-yghd

The value you continue to bring to the income investment community is unparalleled. Thanks for the videos.

JohnsFishTales

Thank you for the video! I’ve pondered the same question whenever I look at my allocation to BDC’s. This was helpful!

momdittomomditto

With all the rate cut chatter, I did some research and arrived at essentially the same conclusion. Well-run BDCs and well-managed funds (like PBDC) know how to navigate the waters in a variety of interest rate conditions. I'm not reducing any BDC holdings and may actually be a buyer if too many people follow the "interest rate cuts are bad for BDCs" mantra and drive the prices/NAV down.
Thanks again for all the excellent videos!

JG-DivMan

Excellent analysis - I had this question @ top of mind….

bethhynes

Great video thank you as always. Yes the management fees and the way they are made to report them is nuts!

Tomh

Great job as always, and answering a question I have contemplated. Thank you for the channel and your shared insights!

robertrice

Thanks for answering most of my questions! The remaining and key one is how BDCs and REITs did in the GFC and in a deeper recession.

jijiipetti

I'm glad you had this on. This is on BDCs -- what about Senior Loans funds that have Floating Rate loans.

jamesgoodman

Great video thank you as always the management fees and 1:18 the way they are made it report those is nuts!

Tomh

One of my favourite income investing channels! Thank you so much!

RossChoShingChan

Added three new BDCs to my collection, GBDC, HGTC, & OBDC, added significantly to ARCC on Hurricane Debby day in August, when it dipped below $20. Also added to CSWC and HRZN, letting MAIN and PFLT ride, too pricey for my wallet. In fact, trimmed a little MAIN to deploy the profit elsewhere. I view BDCs as alternatives to banks, which generally don't pay enough for me to consider income.

Though I like special dividends, I don't add them to my tracker spreadsheet, then when they don't pay, the hit to my income is not as significant. When they do, it's a bonus.

Nemo-ynsp

Great explanation on rate cuts and BDCs👍. I took my profits and sold out of most of my MAIN position a couple of months ago. Good to know these will still do OK as rates fall. I will be continuing to add to my positions in MAIN, GAIN, and ARCC if prices drop over the next few years.

happytravels