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While last week's lower than expected inflation print was good to see, we're still not out of the woods when it comes to inflation and Fed interest rate hikes.
Today, with stocks taking a breather from last week's rally, we want to make sure we don't lose focus on the importance of having inflation-beating investments in our portfolios.
Today I want to bring our focus back to Business Development Companies, also known as BDCs for short. Because BDCs are regulated investment companies (RICs), they must distribute over 90% of their profits to shareholders. In addition, that RIC status means they don't pay corporate income tax on profits before distributing them.
That makes BDCs a great way for individual investors to get paid healthy dividends as early investors.
The pick I have for you today blasted past every projection in its last earnings report, is in the process of steady growth that shows no signs of slowing down, and is paying out an inflation-beating 10% dividend as of this writing.
And best of all, you can grab it for around $24 a share right now.
One of my favorite BDCs is Blackstone Secured Lending Fund (BXSL), a firm that primarily invests in the first lien senior secured debt of private U.S. companies. As the name suggests, BXSL is managed by Blackstone, the largest alternative asset manager in the world.
BXSL's objective is to generate current income with the potential for capital appreciation for distribution to shareholders as dividends. The company principally underwrites floating rate credit structures at the upper end of the capital structure.
The thing I really like about BXSL is that the fund primarily invests in first-lien secured loans (nearly 98% of its total portfolio). That's significant because first-lien secured loans have the first claim on collateral, so if a company goes under, BXSL gets paid off before anyone else.
This makes the BXSL first-lien secured loans much safer than second-lien loans or equity investments, which get lower priority in the event a company is liquidated.
On November 10, 2022, the company reported Q3/2022 results that included net investment income of $132 million, or $0.80 per share in the quarter, up 29% from $0.62 in the prior quarter. Net investment income growth was driven by higher base rates benefitting portfolio yields, averaging 9.1% in the quarter up from 7.8% in the prior quarter.
On the bottom line, net income for the quarter came in at $96 million, or $0.58 per share in the quarter, up 23% from $0.47 in the prior quarter.
Additionally, the fair market value of BXSL's portfolio increased to $9.7 billion at quarter end from $8.2 billion as of September 30, 2021.
All of that growth resulted in the company raising its regular dividend by 13%, resulting in an 11% dividend yield over the past year.
At the current price, the yield is a massive 10.08%!
If you're looking for a way to generate huge inflation-beating yields while at…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.