This 11.3% Yield Looks Compelling

You won’t find many safe double-digit payouts just sitting around. Yield hunters have to venture out into lesser-known industries, like master limited partnerships or real estate investment trusts. Business Development Companies (BDCs) provide another source of high yields in today’s market. These firms invest in privately held businesses and pay out the profits to shareholders. And because most of these borrowers don’t qualify for traditional bank loans, BDCs collect surprisingly high-interest rates.

Apollo Investment Corp. (NASDAQ:AINV) represents one of my favorites. Shares sit at the higher end of the risk spectrum, as the 11.3% yield might imply. But for those willing to stomach more ups and downs, this name could provide a nice income supplement in an already well-balanced portfolio. Apollo has a track record of making smart loans, with only a few nonperforming loans on the books. From a safety perspective, this makes me comfortable that its borrowers will keep paying the bills on time. Most of these loans are secured debt, which means that borrowers have pledged some out of collateral (i.e. property, plants, or equipment). This reduces Apollo’s potential losses in the event of a default, ensuring dividends keep getting mailed out to shareholders.

Source: Income Investors

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