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Msg  2 of 11  at  4/5/2022 9:42:08 AM  by

hendi_alex

The following message was updated on 4/5/2022 9:48:54 AM.

BDCís

From Dividend Detective:
Back in 1980, the U.S Congress created BDCs, technically “regulated investment companies,” as a way of encouraging the flow of investment capital to middle market sized businesses. These are firms with annual revenues typically in the $25 million to $500 million range. They are too small to “go public,” but too large to borrow from their local banks.

BDCs make mostly short-term, unsecured loans from $20 million to $50 million to these clients. Such loans, when made to corporations, are often termed “mezzanine” loans.

To qualify for the corporate tax exemption, a BDC must loan at least 70% of its assets to private or thinly traded, public U.S. corporations, and must distribute at least 90% of its taxable income to shareholders in the form of dividends.

Further, a BDC must make significant managerial assistance available to its client companies. In fact, BDCs often take equity interests in their client companies, which creates the opportunity for the BDC to rack up capital gains when it liquidates those positions. BDCs can qualify for additional tax breaks (lower federal excise taxes) when they distribute at least 98% of ordinary income, plus 98% of any realized capital gains, to shareholders as dividends.

My comments:  BCD’s don’t usually fare well during severe market stress like a financial melt down or during outsized business failure rates.  They do offer juicy cash flow and dividends when the cycle is favorable.
 


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Msg # Subject Author Recs Date Posted
3 Re: BDCís hendi_alex 0 4/5/2022 9:56:42 AM
6 Re: BDCís hendi_alex 0 4/7/2022 7:34:10 PM




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