Most BDCs aim for capital gains, not fat income dividends, but there are exceptions.
At least two more BDCs are slated to go public this fall: Utek and Oxbow.
Of the 58 BDCs organized since 1980, 40 are no longer around or actively traded.
BDCs are required to pay out 90% of their income as dividends to shareholders.
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To protect yourself, stick with those listed BDCs that came through the financial crisis relatively unscathed.
So BDCs hold lots of investments in the most susceptible companies to an economic and financial downturn.
This enabled them to avoid the problems of ACAS and other heavily-indebted smaller BDCs with riskier investments.
Business Development Companies (BDCs) were a mainstay of the income and yield crowd in the 2002-2007 period.
BDCs, which are obliged by law to distribute at least 90% of their net profits to shareholders.
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The PowerShares Listed Private Equity ETF holds all three BDCs mentioned above, totaling almost 10% of the portfolio.
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It tracks 26 BDCs and yields 6.9% but charges 0.85% in annual fees.
"Basically, it's mom and pop become venture capitalists, " says Steven Boehm, a Washington securities lawyer who advises a group of BDCs.
After a 10% plunge last week, the shares are off 40% from last Spring, a big underperformance compared to other BDCs.
As a result, the share price and dividend did not suffer the same dramatic reductions that other BDCs saw during 2008-09.
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Unlike junk funds, BDCs can and do work with detailed inside information and sometimes negotiate board seats as part of their deals.
Less controversial yield-rich picks can be found among business development companies (BDCs).
The fact remains that BDCs have seldom been world-beaters in total return.
If choosing a single BDC makes you nervous, you can buy E-TRACS WELLS FARGO BUSINESS DEVELOPMENT COMPANY INDEX ETN (BDCS, 26) .
BDCs were hit hard by the liquidity freeze during the financial crisis.
This will be another good year for the BDCs, Fitch Ratings expects.
In addition, the rising number of domestic and global equities sporting rising dividend yields has pressured the flow of funds going into the BDCs.
Several BDCs saw their share prices fall 90% peak-to-trough from 2007-09.
Because MAIN started operations much later in the housing and private equity bubble that crashed in 2008-09, she had many fewer problem assets than other BDCs.
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And since they can direct 30% of their assets into whatever they please, BDCs can finagle higher income through investments in anything from Treasury bonds to Microsoft stock.
Like other investment companies, BDCs are compelled, as the price for not being taxed themselves, to distribute most of their capital gains and net operating income to shareholders.
While some BDCs have come out of the credit crisis stronger than ever, others still have a long way to go before they regain the trust of retail investors.
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One long neglected niche: business development companies, or BDCs.
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