Among high-yielding stocks, business development companies (BDCs) are some of the most common income investments that few people understand. These companies can boost the yield earned from an income portfolio thanks to their outsize dividend yields, which frequently top 8% per year.
But before diving in head first, it's important to understand the unique risks and rewards of investing in these stock market oddballs. Here's a primer on how BDCs work, and how to analyze a BDC before investing in one.
BDCs are in many ways just closed-end funds that make loans to, and buy equity stakes in, mostly private businesses around the United States. They invest in companies that can be as small as a neighborhood cafe, or as large as billion-dollar businesses with household names.
Source: Fool.com