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Fifth Street Finance Corp. Message Board

  • novalmer novalmer Sep 6, 2011 12:15 PM Flag

    BDCs: Attractive play for yield investors - FBR Capital FSC, yield = 14%

    BDCs: Attractive play for yield investors - FBR Capital
    FBR Capital recommends investments in business development cos (BDCs) for those yield investors that are concerned about the overhang on other traditional dividend players such as property and mortgage REITs. The group pays an 11% yield today, trades at 85% of NAV, and is relatively unaffected by the regulatory overhang on the other yield plays. They recommend a basket approach favorite ideas in the space include PennantPark Investment (PNNT, implied yield = 11%), Fifth Street Finance (FSC, yield = 14%), and MCG Capital (MCGC, 16%). Apollo Investment Corporation (AINV) also has an attractive yield at 13%; ACAS is their Top Pick in the space but does not pay a dividend.

    Income Focus: FBR Capital markets highlights BDCs as an attractive play for yield investors
    FBR Capital this morning recommended business development companies (BDCs) for yield investors concerned about the headline risk from traditional dividend plays such as the mortgage REITs. Firm notes the recent dislocation in the credit markets has presented BDCs with attractive investment opportunities (wider spreads); their market opportunity remains robust. Their favorite ideas in the space include:

    PNNT: implied yield 11.2%; 0.87x NAV
    FSC: implied yield 14.0%; 0.87x NAV
    MCGC: implied yield 15.8%; 0.63x NAV

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