The Best 12%+ Yields Available Right Now
These Stocks Yield 12%+
Retirement planning used to be simple.
Invest your nest egg in something conservative, then use those interest checks to fund your golden years.
Obviously, you can’t call that the case anymore. Bank certificates of deposit yield next to nothing. Traditional investments like Treasuries and municipal bonds aren’t much help either.
Long-term bonds yield only around two or three percent. Even if you’re not worried about inflation, that’s not enough. It would take a seven-figure salary to fund even the most modest retirement.
You have to dig deeper to fund safe yields nowadays. Thankfully, one quiet niche of the stock market still pays out double-digit yields backed by safe assets, good management teams, and a growing stream of cash flows.
I’m talking about top-quality business development companies (BDCs). Congress created these investment vehicles in 1980 as a way to help mid-sized businesses access the stock market. And with payouts topping 12% all the way up to even 17%, income investors should give these firms a second look. Here’s why:
Simple to Understand: BDCs lend money to businesses, collect interest payments, and pass on the income to owners. As long as the borrowers pay back their debt on time, the BDC makes a profit. It’s not a big divergence from old-fashioned banking, but if managed properly, this strategy can make you quite rich over time.
Profitable Niches: Big banks don’t want to lend to mid-sized businesses anymore. New regulations have forced institutions to tightened their balance sheets and reduce the number of loans they make. With a void in the marketplace, BDCs have filled the gap. These firms have their pick among the best deals and the best borrowers. And because BDCs have little in the way of competition, they can often charge double-digit interest rates on loans.
Safe Borrowers: BDCs lend most of their capital to firms with between $5.0 million and $30.0 million in annual earnings–in other words, real companies with viable businesses, not some tech startup powered by hopes and dreams.
True Partners: BDCs don’t just lend money and earn interest. Like a venture capital firm, they work with their borrowers by providing advice, financial support, and other business services. Because BDCs work so closely with their portfolio businesses, they generally enjoy below-average default rates.
Safe Debt: In the event something does go wrong, most of these loans have land, factories, or some other form of collateral. Moreover, BDCs usually stand first in line to get their money back during a bankruptcy process. While high-quality firms typically maintain strict lending standards, this type of security helps investors sleep at night.
Variable Rates: A sharp spike in interest rates can crush lenders. That’s because their short-term funding costs increase at the exact same time their long-term loan crash in value. To hedge against this risk, most BDCs make loans on a variable rate basis. So if yields rise, the BDC will collect more in the way of interest income. That provides owners with some protection against changing rates.
High Yields: Thanks to a special loophole created by Congress, BDCs pay almost nothing in the way of corporate taxes. But in exchange for this benefit, these firms must pay out almost all of their profits to shareholders. As a result, it’s not uncommon to see BDCs paying out safe, double-digit yields.
Liquid: BDCs often get compared to venture capital or private equity funds, both in their strategy and investment returns. But unlike these other investment vehicles (which are often closed to all but wealthiest of investors) anyone can purchase shares of a BDC on the open market. Most firms trade on the NASDAQ or the New York Stock Exchange. And aside from paying a small brokerage commission, you can buy and sell shares during normal market hours.