This is off-the-radar BDC offers solid total return potential. Barings BDC Inc. (NYSE: BBDC) is a publicly traded, externally managed investment company. It seeks to invest primarily in senior secured loans to private U.S. middle-market companies that operate across a wide range of industries.
The company specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing and recapitalizations in lower middle market, mature and later-stage companies. Barings BDC’s investment activities are managed by its investment adviser, Barings, a leading global asset manager based in Charlotte, North Carolina, with over $335 billion of assets under management firmwide.
Shareholders receive a 7.73% dividend. Jefferies has a $12 price target, and the consensus target is $11.68. Friday’s closing print was $10.86.
This is another highly regarded BDC across Wall Street. Hercules Capital Inc. (NYSE: HTGC) is the largest non-bank lender to venture capital-backed companies at all stages of development in a broadly diversified variety of technology, life sciences and sustainable and renewable technology industries.
With over a decade of experience in venture debt, Hercules is uniquely positioned to quickly create innovative financing solutions that perfectly fit within a company’s existing capital structure and map to its business objectives. Recognized as the industry leader, Hercules understands the flexibility these types of companies need and has the experience to work closely with them, even through challenging times, to help them reach critical milestones.
Its deep sector expertise, geographic presence and strong capital base have made Hercules the lender of choice for more than 480 innovative companies.
Shareholders receive a $7.66% dividend. The $20 Jefferies price target is higher than the $18.44 consensus target. The stock closed on Friday at $16.70.
Oaktree Specialty Lending
This lower-priced stock offers investors the ability to buy more shares. Oaktree Specialty Lending Corp. (NASDAQ: OCSL) specializes in investments in middle-market, bridge financing, first and second lien debt financing, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions and management buyouts in small and mid-sized companies.
The fund seeks to invest in education services, business services, retail and consumer, health care, manufacturing, food and restaurants, construction and engineering, and media and advertising segments. It invests between $5 million to $75 million principally in the form of one-stop, first lien, and second-lien debt investments, which may include an equity co-investment component in companies with enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America. The fund seeks to be a lead investor in its portfolio companies.
Investors receive an 8.11% dividend. Jefferies has set an $8 price target. The $7.57 consensus target is closer to Friday’s closing price of $7.15.
While the Jefferies price targets are not sky-high, combined with the strong dividends, the total return possibilities for all of the companies look to be very solid. Given the sector has also been somewhat out-of-favor, the risk/reward also looks compelling.