8% Yield, 12% Discount, Monthly Pay Stock

We've covered several Business Development Companies, known as BDCs, in our recent articles. BDCs offer retail investors exposure to privately-held firms, which often also are funded by venture capital firms. However, since they invest in privately-held companies, it's up to a BDC's management to keep investors informed on the economic health of their portfolio companies. BDC share prices got slammed in 2020 due to the uncertainty as to how their portfolio companies would perform in the COVID lockdown environment. However, most of them have bounced back, as the year progressed, due to better than expected non-accruals.

Prospect Capital (PSEC) is one of the largest BDCs in the market, among the top 5 market caps for the industry. Founded in 2004, NY-based Prospect Capital provides private debt and private equity to middle-market companies in the US, with a focus on sponsor-backed transactions and direct lending to established owner-operated companies. PSEC yields 8.05%, with strong trailing dividend coverage of 1.33x. It's trading at an -11.7% discount to NAV/share, much lower than the BDC industry average. Management declared steady $.06 monthly dividends through January.

Source: Seeking Alpha

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