Morgan Stanley Direct Lending Fund

MSDL

Market cap $1.29B

Double-digit yields look irresistible… but there are hidden risks few income investors truly understand. Business Development Company dividends are about to change – here's what everyone is missing.

Just as I predicted, Morgan Stanley Direct Lending Fund has cut its dividend. Yet, as the cut was minor (only 10%) and the recent SaaS-driven selloff has pushed the BDC into an even deeper discount zone, we can still buy MSDL at ~13.5% yield. Apart from the cut, MSDL has released several other important fundamental data points in its Q4 report, which support a long-term bull case here.

Morgan Stanley Direct Lending Fund (MSDL) Q4 2025 Earnings Call Transcript

Morgan Stanley Direct Lending Fund (MSDL) came out with quarterly earnings of $0.49 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.57 per share a year ago.

NEW YORK--(BUSINESS WIRE)--Morgan Stanley Direct Lending Fund (NYSE: MSDL) (“MSDL” or the “Company”), a business development company externally managed by MS Capital Partners Adviser Inc. (the “Adviser”), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2025. QUARTERLY HIGHLIGHTS Net investment income of $42.4 million, or $0.49 per share, as compared to $43.7 million, or $0.50 per share, for the quarter ended September 30, 2025; Net asset value of.

System-wide BDC dividend cuts are highly likely as base dividend coverage averages 99% and growth is constrained. As a result, many BDC investors have decided to sit on the sidelines until the expected dividend cuts materialize. The idea is that a cut will lead to a negative share price reaction and thus provide a better opportunity to buy at a bargain price.

Morgan Stanley Direct Lending (MSDL) is rated Hold, due to sector headwinds, declining portfolio quality, and dividend coverage concerns. MSDL's non-accrual loans rose to 1.2% at cost, and portfolio yield declined to 9.7%, as SOFR and spreads compressed. The $0.50 dividend is barely covered by net investment income; a dividend cut appears likely and is partially priced in.

The market has punished MSDL very hard. Currently, MSDL trades at ~26% discount to NAV, which is the lowest level it has ever had and also way below the sector average. The key driver behind the depressed valuation is the increased credit risk.

The market is pricing in a disaster that the data still refuses to confirm. Deep discounts and double-digit yields are colliding in an overlooked corner of the market. If sentiment flips, the upside could surprise even seasoned income investors.

NEW YORK--(BUSINESS WIRE)--Morgan Stanley Direct Lending Fund (NYSE: MSDL) ("MSDL”), a business development company externally managed by MS Capital Partners Adviser Inc., today announced it will release its financial results for the fourth quarter and fiscal year ended December 31, 2025, on Thursday, February 26, 2026, after the market closes. MSDL will host a conference call at 10:00 am ET on Friday, February 27, 2026, to review its financial results and conduct a question-and-answer session.