Article Of The Week
"One Of The Best BDCs For Income"
As you know by my name, I love dividends. And in addition to sharing on here, I write regularly in the investment platform- Seeking Alpha.
My goal there is to teach everyday investors about building wealth, so they won’t to need to work to traditional retirement age.
I want to help you take control of your life, have F.I.R.E.
And the platform allows writers to share one article once a week free of charge. So, I like to share them with all my current & future subscribers. (see below).
It amazes me that I don’t hear many investors ever mention business development companies, or BDCs, when it comes to income-focused investing. It’s usually Dividend Aristocrats & Dividend Kings like The Coca-Cola Company (KO), Pepsi (PEP), Procter & Gamble (PG), Walmart (WMT), and monthly-paying REIT Realty Income (O) I usually hear about.
Similar to REITs, BDCs were created by Congress. But the sector (BIZD) came two decades later in 1980. In short, BDCs act as banks for small & medium-sized businesses. Like REITs, BDCs are required to pay out 90% of their taxable income in the form of dividends.
While BDCs are considered riskier investments, many performed well from 2022 to 2025 due to their interest rate sensitivity. When interest rates rise, BDCs see higher income, meaning the chance to pay out higher dividend income. As a result, many BDCs enjoyed solid price appreciation.
But with interest rates seeing 4 cuts since last year, many BDCs are now underperforming. Many have also reduced their dividends, which played an integral part in their underperformance. When any company cuts their dividend, this often leads to a declining share price.
And with more rate cuts expected, I think more BDCs will eventually be forced to cut their dividends. But Capital Southwest (CSWC) is one that I think could potentially avoid reducing their dividend due to its high-quality amongst other things.
In this week’s article of the week find out why I think this high-quality BDC could potentially avoid cutting its dividend and continue rewarding shareholders with solid income for the foreseeable future.
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For educational purposes only. I am not a financial professional. Please do your own due diligence.
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