Oaktree Specialty Lending

OCSL

Market cap $1.13B

LOS ANGELES--(BUSINESS WIRE)--Oaktree Specialty Lending Corporation (NASDAQ:OCSL) (“Oaktree Specialty Lending” or the “Company”) today announced that it will report its financial results for the first fiscal quarter ended December 31, 2025 before the opening of the Nasdaq Global Select Market on Wednesday, February 4, 2026. Management will host a conference call to discuss the results on the same day at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. The conference call may be accessed by dia.

BDC net investment income levels are declining as the Fed lowers rates. Despite lower base rates, I see no reason to rotate out of the BDC sector. In the article I detail how BDCs have outperformed the S&P 500 and high yield credit even in prolonged low-rate environments.

This Is How I'm Harvesting BDC Cash Flows For My Retirement. The double-digit yields, term 'private credit,' cases like First Brands and Tricolor are just some examples that introduce a high degree of skepticism. However, if done right, BDCs can bring a lot of value to the table for safe passive income investors.

BDCs face earnings pressure from lower base rates, but fears of severe dividend cuts are overstated. Quite many BDCs have several levers to pull in order to absorb ~100 bps of base rate cuts without touching their dividends. Yet, I would say that the non-accrual risk is understated.

Agency mortgage REITs duel to the dividend cut. There are 7 facing off. The top 3 are much better than the other 4. Valuations are important and awful. Deal with it.

It has become a consensus in the market that many BDCs, sooner or later, will have to deliver unpleasant dividend cuts. For example, the sector average dividend coverage level is 100%, which does not look promising amid a lower base rate environment. Yet, as in the case with almost any average, it consists of several positive and negative outliers.

Oaktree Specialty Lending faces severe portfolio performance issues, with a 6.5% cost-based non-accrual ratio and inconsistent dividend coverage. OCSL's high non-accruals, despite an 83% first-lien allocation, raise significant concerns about loan quality and dividend sustainability. With 91% floating-rate exposure and falling net investment income, OCSL is at high risk of a dividend cut if interest rates decline.

BDCs are facing pressures from multiple fronts. Yet, they do not have much ammo left to fight back via portfolio growth. This is not good for shareholder and BDC managers, who earn fees based on asset size and earnings results.

Oaktree Specialty Lending has historically generated mediocre annualized returns for buy-and-hold investors. Rising defaults and write-offs raise concerns over further dividend cuts. Structural shortcomings prevent the company from building a loan-loss reserve, translating to practically an inevitable decline in NAV.

Blackstone Secured Lending and Oaktree Specialty Lending have pulled back sharply. I compare them side by side. I share why I prefer BXSL over OCSL, and what it would take for me to buy them.