This Fund Gives You Diversity and Dividends

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Posted: Jul 04, 2015 12:01 AM

A business development company (BDC) is one that helps relatively small companies to grow and to develop, primarily by providing loans and capital investments. Investors can buy shares in public BDCs to gain exposure to the small private companies they finance, as well as the BDCs themselves. Today’s featured fund, BDC Income ETF (BIZD), pools together a collection of BDCs and offers a high dividend yield.

Many BDCs are able to pay strong dividends, and BIZD ranks among the Top 10 dividend-paying ETFs on the ETFU.com website. This fund holds a broad collection of BDCs to track the industry’s results closely. One of its top holdings, Main Street Capital Corporation (MAIN), is a BDC that serves relatively small and private companies.

MAIN pays out an attractive and consistently rising dividend. It also is a recommendation in the monthly Forecasts & Strategies investment newsletter of my Eagle Financial Publications colleague Dr. Mark Skousen. BIZD offers exposure to Main Street and companies like it.

The dividend yield paid out from BIZD produces an enticing 8.29% yield. BIZD is a fairly small fund, with only $80.5 million in assets under management. Its year-to-date performance shows a 0.22% loss, but investors are still on track to turn a profit due to its dividend payments. The chart below shows 12 months of performance from BIZD.

This fund is fairly concentrated, with 66.67% of its assets distributed among its top 10 holdings. Among them are Ares Capital Corp. (ARCC), 14.68%; American Capital Ltd. (ACAS), 9.93%; Prospect Capital Corp. (PSEC), 7.90%; FS Investment Corp. (FSIC), 6.97; and Main Street Capital Corp. (MAIN), 5.07%.

An exchange-traded fund (ETF) that invests purely in BDCs could be a good addition to the portfolio of an investor who is seeking to avoid the risk of choosing just one such company. If this idea appeals to you, BDC Income ETF (BIZD) is the only ETF on the market that matches this description.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my column from last week about a global dividend ETF.