Sunday, April 10, 2011

Business Development Corps Yielding over 8%

A private equity firm is a company that invests in the equity and/or debt of private companies. Many of these firms are limited to accredited investors. But according to a list at, there are over 20 that are publicly traded on the NYSE or NASDAQ, with yields ranging from 3.5% to 12.6%. Some of these companies are registered as Business Development Corporations.

A Business Development Corporation, also known as a Business Development Company or BDC, is a publicly traded private equity fund. Many private equity companies are registered as BDCs for tax advantages, generally paying no corporate income tax because at least 90 percent of their income, profits, and capital gains are paid out as taxable dividends to investors.

PennantPark Investment (PNNT) is a business development company that yields 9%, and has been paying quarterly dividends since June of 2007. The company invests between $10 million and $50 million in each of its portfolio companies, holding mezzanine debt, senior secured loans, and equity investments. The stock trades at 11.4 times forward earnings and has a forward price to earnings ratio of 9.6. PennantPark invests in such companies as the hot tub and spa manufacturer Jacuzzi Brands Corp., Learning Care Group, Inc. which is owner of one of the largest early education and child care providers La Petite Academy, and VPSI, the world's largest vanpool service provider.

TICC Capital (TICC) is a BDC that has been paying dividends quarterly since 2004, and yield 8.4%. The stock has a PE of 5.0 and a forward PE of 10.0. The company invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, and common stock of both private and public companies, specializing in technology, media, telecommunications, and medical equipment. The company's investments include NetQuote, Inc., the web-based portal for insurance companies and consumers, and StayOnline, Inc. a provider of wireless high-speed Internet access solutions for the lodging industry, and Ai Squared, a manufacturer of assistive technology software which makes the screen magnification program ZoomText.

Golub Capital (GBDC) is a private equity BDC firm that just went public last year. It yields 7.9%, payable quarterly, and trades at 11.4 times forward earnings.

To see a list of over 20 high yield business development companies and private equity firms, which can be downloaded, sorted, and updated, go to Several of these companies pay dividends monthly and more than a dozen have yields above 8%.

Disclosure: Author did not own any of the above at the time the article was written.


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