BDC Index is another 10% leader (BDCX)
Collection of "Shark tank" companies pays a 17% dividend!
Symbol: BDCX
Description: What if I told you there was a way you could put money into individual entities that invested into developing or struggling companies? No, we aren’t talking about Mark Cuban in Shark Tank, we are talking about Business Development Companies (known as BDCs). There are many publicly traded companies that each play the role of “virtual Cuban” and help struggling CEOs in return for equity in their company. These companies often pay a healthy 5-9% dividend and can be quite profitable. However, there are some that invest in the wrong CEOs and lose money. Enter the MVIS BDCX index - now you can buy shares in an index that holds over 20 such companies and pays the shareholder a dividend based on the dividends and other cash it collects. It’s like if an index bought shares in Cuban, Daymond John, Kevin O’Leary and Lori Greiner from Shark Tank!
Current Price: $28.17
Dividend Yield: 17.2%
Performance: Up 2.18% over the past month
- Down 7.8% over the past 3 months
- Down 9.12% over the past 6 months
- Flat (down 1.01%) YTD
Holdings: BDCX holds some of the top BDCs including Main Street Capital (MAIN), Ares Capital Corp (ARCC), Hercules Growth Capital (HTGC), Oaktree (OCSL) and others. One quick note, this is an ETN (exchange-traded Note) instead of an ETF. The difference is the ETN allows the 1.5 times leveraged long exposure to pay higher coupon rates. Without leverage, it could only pay the 7-8% it collected from the DBCs directly. The way to look at leverage is you are increasing the volatility, but also gaining more upside and monthly cash. Given it has such a broad section of BDC companies, the risk from leverage is a little mitigated as it isn’t dependent on just one company to succeed.
Opinion: BDCX is another unique investment that hits an area of the market that tends to go un-noticed by investors. I won shares in these individual BDCs in other accounts so getting an ETN with all of them is hard to pass up. This was also hit pretty hard by the bank crisis and it is a great time to begin adding shares. Most BDC companies in this index weren’t at-risk like some of the banks that collapsed (ie, SVC) - but the market still penalized them by being the industry. The recent earnings by companies like MAIN, HTGC and ARCC were very positive and should help the BDCX continue to grow.
Personal investment: This is one of the 10% leaders in my portfolio. As with others, you can DCA into the position over time and feel good about the value here.
Summary: BDCs are one of my favorite investments and finding an ETN that allows me to invest in nearly all at once was pretty exciting. The 17+% annual dividend hits our portfolio goal right on the mark as well. The leverage does add a little risk (we will use a couple funds with leverage), but I think the risk is worth the dividend upside.
Fund Link: ETRACS Quarterly Pay 1.5X Leveraged MVIS BDC Index ETN (BDCX)