These 6 ‘Strong Buy’ Business Development Companies Pay Massive Dividends

This is another top BDC that posted outstanding results for the quarter and has solid upside potential. Apollo Investment Corp. (NASDAQ: AINV) is a closed-end, externally managed, non-diversified management investment company specializing in private equity investments in leveraged buyouts, acquisitions, recapitalizations, growth capital, refinancing and private middle-market companies.

The company provides direct equity capital, mezzanine, first lien secured loans, stretch senior loans, unitranche loans, second lien secured loans and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions.

The fund also may invest in securities of public companies that are thinly traded and may acquire investments in the secondary market and structured products. It prefers to invest in preferred equity, common equity/interests and warrants and makes equity co-investments and also may invest in cash equivalents, U.S. government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-U.S. investments or securities of public companies that are not thinly traded.

Apollo also focuses on other investments such as collateralized loan obligations and credit-linked notes. The fund typically invests in construction and building materials, business services, plastics and rubber, advertising, capital equipment, education, cable television, chemicals, consumer products/goods durable and nondurable and customer services, direct marketing, energy (oil and gas), electricity and utilities, aerospace and defense, wholesale, telecommunications, financial services, hotel, gaming, leisure, restaurants, as well as environmental industries, health care and pharmaceuticals, high tech industries, beverages, food and tobacco, manufacturing, media (diversified and production), printing and publishing, retail, automation, aviation and consumer transport, transportation, cargo and distribution.

The company primarily invests in the United States. It primarily invests between $20 million and $250 million in its portfolio companies. The fund seeks to make investments with stated maturities of five to 10 years.

Shareholders receive a 10.00% dividend. The Jefferies price target on Apollo Investment stock is $15. The consensus target is $13.16, and Wednesday’s closing share price was $12.42.

Ares Capital

This is a favorite BDC across Wall Street. Ares Capital Corp. (NASDAQ: ARCC) is a leading specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle-market companies, venture capital-backed businesses and power-generation projects.

It originates and invests in senior secured loans, mezzanine debt and, to a lesser extent, equity investments through its national direct origination platform. The company’s investment objective is to generate both current income and capital appreciation through debt and equity investments primarily in private companies.