VanEck BDC Income ETF

BIZD

Market cap $1.56B

I am thankful for many things this year. I am particularly thankful for my favorite Black Friday special from Mr. Market. I detail why I like this high-yielding bargain.

BDC earnings are sensitive to interest rates. As there is no meaningful margin of safety in the BDC system, forthcoming interest rate cuts might trigger a wave of dividend cuts. For prudent passive income investors who want to avoid experiencing stress that is associated with dividend reductions, BDCs might not seem like a good option.

Business Development Company prices are down due to rate cuts and unwarranted credit fears. Credit quality is strong; non-accruals remain historically low. Tax efficiency improves starting in 2026 (Section 199a dividends).

The ETF isn't the worst of the lot, but its returns have been far from ideal. It's saddled with a year-to-date loss of nearly 10%.

There is a major market disconnect in which there are blue-chip dividend payers offering 11%+ yields right now, despite posting strong fundamentals. I discuss why the market is bearish on these stocks and why I think the fears are overblown. I also share two high-yield stocks that I think are attractive buys at current pricing.

Most 10% yielding portfolios inevitably crash and burn. However, there is a path to achieving a potentially sustainable 10% yielding portfolio. I share how it possibly can be done.

Putnam BDC Income ETF has outperformed VanEck BDC Income ETF since inception, offering strong management and a high current income focus. PBDC's portfolio is diversified among leading BDCs, with a 10.5% distribution rate at NAV and a fair price-to-book ratio near 0.97x. Market fears over rate cuts and BDC dividend reductions are likely exaggerated; long-term income investors should expect volatility but benefit from high yields.

BIZD is the focus, offering broad exposure to business development companies in the high-yield private credit sector. Recent bankruptcies of First Brands and Tricolor have heightened investor scrutiny, but these events are not considered systemic threats to BIZD. Credit spreads in BIZD already price in expected bankruptcies, and the fund remains attractive for income-focused investors at discounted levels.

3 dividend stocks with attractive dividend yields, high-quality business models and management teams, and very strong growth potential have pulled back lately. I look at the risks that have prompted the market to beat them down aggressively. I also detail why I think the risks are overblown, and these stocks are compelling buys on the dip.

The Fed's dovishness has been the key driver for the BDC sell-off. The idea is that lower interest rates should lead to lower dividends (i.e., BDCs cutting their dividend across the board). While it is a process that takes time, the current data show that many BDCs are well-positioned to safeguard their existing dividends.