Over the past two months, I’ve covered several of my favorite inflation-beating investment ideas, everything from floating rate investments to master limited partnerships (MLPs) and real estate investment trusts (REITs).
Today I want to bring our focus back to business development companies, also known as BDCs for short.
A business development company is an organization that invests in small- and medium-sized companies in the initial stages of their development.
BDCs allow smaller, nonaccredited investors to invest in them (the BDC), and by extension, in small growth companies.
Because BDCs are regulated investment companies (RICs), they must distribute over 90% of their profits to shareholders. That RIC status means they don’t pay corporate income tax on profits before distributing them to shareholders.
That makes BDCs a great way for individual investors to get paid healthy dividends as early investors.
The pick I have for you today combines a diversified set of income streams with an astonishing 14.4% dividend at the time of writing and makes a great inflation hedge for any investor.
That company is Newtek Business Services Corp (NEWT), andit provides a wide variety of services: business lending including SBA 7(a) loans, 504 loans and conventional loans, electronic payment processing, managed technology solutions like cloud computing, technology consulting, eCommerce, accounts receivable and inventory financing, personal and commercial lines insurance services, web services, data backup, storage and retrieval, and payroll and benefits solutions to small- and medium-sized businesses. They have relationships nationwide across all industries.
NEWT is interesting because not only does the company have a portfolio of loans, but it also functions as an operating business, by way of its various business services.
I like that because it gives NEWT revenue diversification, which can help offset any potential difficulties in its loan business.
Additionally, NEWT is also one of the highest-yielding stocks in the BDC space with a dividend yield of 14.4%.
So, if you’re looking for a way to generate huge inflation-beating yields while at the same time having exposure to early-stage investment opportunities, consider NEWT.
As always, I’ll have another inflation-beating investment idea for you next Monday. Make sure to keep an eye on your inbox.
Until then, have a great week.
— Shah Gilani
Source: Total Wealth Research