We take a look at the action in business development companies through the third week of February and highlight some of the key themes we are watching. BDCs experienced a strong 2% total return this week, recovering from previous weakness. Investors should consider sustainable sources of performance apart from traditional investment income that can create a competitive advantage for BDCs.
Capital Southwest is entering into a sustained circle of virtue. With rates remaining stubbornly higher, management is taking precautions for the future. Owning standard-bearer investments can help de-risk your portfolio.
The Federal Reserve reimagined their goals to better match their chosen interest rate policy. Higher interest rates do not lead to a decrease in government spending. It would be cool if higher rates reduced deficits, but they don't. The free market is pretty good at responding to higher prices. It also responds to lower prices.
We take a look at the action in business development companies through the first week of February and highlight some of the key themes we are watching. BDC fell on the week with an average drop of 2.5%. BDCs are reducing their management, likely reflecting the increasing competition in the private credit sector.
Mortgage REITs are not buy-and-hold investments and investors who focus solely on dividends are getting burned. Preferred shares offer better performance and stability compared to common shares in mortgage REITs. Equity REITs are also being negatively impacted, with investors seeking higher yields elsewhere.
Ares Capital and Capital Southwest are blue chip dividend stocks with ~10% yields. We issued Buy ratings on them 13 months ago and the stocks have delivered exceptional performance since then. We compare ARCC and CSWC side-by-side and offer our take on which is the better buy today.
DALLAS, Jan. 31, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (“Capital Southwest” or the “Company”) (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, announced today the U.S. federal income tax treatment of its 2023 dividends.
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