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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: JimisJim who wrote (26722)	3/1/2017 9:14:52 PM
From: Elroy	Read Replies (1) \| Respond to of 34328

I think "picking" is essential for any BDC and definitely do not like the idea of leveraged baskets of BDCs... PSEC made me anxious, BDCL would make me crazy (crazier, some would say) and an insomniac.. I love BDCL. I think as long as you can convince yourself that the BDC industry as a whole is not going out of business, BDCL is going to do well over time. The payout (15%-20%) is too high for any other conclusion UNLESS most of the BDCs are going to bankrupt themselves somehow. Hold BDCL for three to four years, and you've probably got 60% of your investment back in dividends. As long as the BDC industry doesn't go bust, that's hard to start with that proposition and end up with a bad investment. I have the opposite opinion as you of picking individual BDCs. Lets say you screw up in your individual pick. Lets say you chose FSC 2-3 years ago when it was $9. Now it's $5 and you've received maybe $1.50 in dividends. THAT's a disaster. Lets say you buy MAIN because it has such a great history of executing and growing book value. In the year that you buy it, they stumble, some investments fail, and MAIN's premium to book value vanishes and you lose 50% of you investment as the share falls. The advantage of BDCL is that you are buying the industry, so company specific hiccups don't kill you. Hopefully individual stock problems are offset by unexected strength in other BDC stocks that are in the basket. In BDCL you essentially own the publicly traded BDC industry, the low valuation dogs and the high valuation superstars, and you just hope they don't ALL screw up at the same time while you collect your 15%-20% annual dividend.

To: JimisJim who wrote (26722)	3/1/2017 9:44:26 PM
From: Elroy	Read Replies (1) \| Respond to of 34328

I went back and looked at the first time I purchased BDCL. It's really depressing! I bought 1,000 shares at $28.00 of Feb 6th, 2013. What a disaster! After that the BDC industry had a big dip because the stocks got kicked out of some indexes and all the index funds had to sell. The stocks all dipped again because their industry - which had blossomed after the financial crisis since no one was making risky loans - sorta became saturated so it was harder to find decent companies to lend to and earn a 10% return. The yield on the portfolios declined, and the shares along with them as investors were concerned with dividend reductions. Then the oil and commodity bust killed the industry again and all the BDC stocks got crushed since investors didn't know how energy company bankruptcies would hurt the loan portflolios. BDCL went down to about $14 at one point. Maybe even $12? So now BDCL is $21, I've lost $7.00 per share on that first purchase. But, I've received 3 full years (2014, 2015 and 2016) of dividends of about $2.75-$3.00 per year, not exactly sure). Maybe I've receive $8.00 or more in dividends from that first purchase. So that horrible investment is actually up a little bit (ignoring taxes). I bought the BDC industry in advance of all that bad news, and due to the high dividend payout, I'm about doing OK on the investment. That's pretty good if you ask me. I've also bought BDCL many more times on the way down and also on the way back up, and I'm close to even on my investment IGNORING dividends. If BDCL gets to $22 I think my capital gain/loss is zero from ALL the buys is zero, but I will have collected the 15%-20% distributions along the way. I've sold off most of my individual BDCs, and put the cash instead into BDCL. Individual BDCs yield 9%, BDCL yields 18%. Hold for a few years, and that yield difference is hard to overcome. Not sure why I'm telling you this, but there you are.