Golub- A BDC for "Accelerated Income"
There continues to be strong momentum in the Business Development Company (BDC) space under current market conditions, notes Bryan Perry, income expert and editor of Cash Machine.
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BDC financing for small- to medium-sized businesses in an efficient manner is highly attractive to companies seeking access to capital without dealing with a more rigorous regulatory environment from banks.
Loan portfolios are providing BDCs exceptional yields, bolstering dividend payouts and boosting Net Asset Values (NAV) of most well-run BDCs. Golub Capital BDC (GBDC) falls into this special category.
Currently, GBDC has entered into a merger agreement with privately traded Golub Capital BDC 3 Inc., with GBDC as the surviving company. Following the merger, GBDC is expected to have $8.5 billion in total assets at fair value and investments in over 340 portfolio companies. The merger has already been approved by both boards.
The transaction is expected to be immediately accretive to GBDC’s net investment income per share. This accretion is expected to be driven by the combined company’s lower incentive fees and lower combined operating expenses.
Based on the earnings power of the company and the new incentive fee rate, on Jan. 16, GBDC’s board of directors increased GBDC’s quarterly base distribution by over 5% and declared a quarterly distribution of $0.39 per share, which is payable on March 29 to stockholders of record as of March 1.
GBDC’s board expects to continue to evaluate the potential for supplemental distributions under its quarterly variable supplemental distribution framework, which was introduced in fiscal year 2023.
GBDC’s board has also announced its intention to declare additional special distributions totaling $0.15 per share, to be distributed in three consecutive quarterly payments of $0.05 per share per quarter, with the record date of the first special distribution expected to occur shortly after the closing of the proposed merger.
The new dividend schedule puts the current annual payout at $1.56 per share, not including any future special dividends. Hence, the recent dividend yield is 10.04%, and makes for a compelling addition to our Accelerated Income portfolio. Buy under $16.
See also: AMT: A High-Yielding Way to Profit from Wireless Sector Growth
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