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The number that stops investors cold when they look at the Putnam BDC Income ETF (NYSEARCA:PBDC) is 13.49%.
Income investors chasing yields north of 10% keep circling back to business development companies, the publicly traded lenders that finance middle-market private businesses.
BDCs play an essential role in financing middle-market companies across America; they also earn interest rates averaging over 2% higher than typical high-yield corporate bonds. Putnam BDC Income ETF (PBDC) has outperformed VanEck BDC Income ETF (BIZD) since its 2022 inception, driven by active management and higher yields. PBDC's portfolio is almost entirely invested in BDCs, yielding 10.9%, while BIZD's portfolio holds 34% T-Bills, dragging the yield down to 8.57%.
The VanEck BDC Income ETF (NYSEARCA:BIZD) just delivered a jolt to income investors: its July distribution came in at $0.24 per share, roughly half the $0.48 paid in April.
Retirement income requires more than just high yield. REIT funds may not be the best solution. A balanced REIT portfolio can offer income and growth.
Business Development Companies (BDCs), such as BIZD, offer high yields but carry elevated risk due to their lending to less stable small and medium businesses. Rising economic uncertainty and recent inflation spikes have increased the risk profile for BDCs, making their borrowers more vulnerable. Many BDCs have underperformed recently, resulting in even higher dividend yields and steep discounts, but these may not offset the underlying risks.
The VanEck BDC Income ETF (NYSEARCA:BIZD) offers investors a passive, diversified slice of the Business Development Company sector with double-digit distribution yield.
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