BDC Managed by Top Wall Street Firm
Today’s focus pick is Goldman Sachs BDC stock.
If you are seeking regular income, consider looking at an investment vehicle that operates as a business development company (BDC).
BDC structures, which tend to be high-yielding, were initially created in 1980 by U.S. Congress as a strategy to drive jobs growth and help emerging companies raise capital.
Once a company is accepted by a BDC, they have access to expertise to grow operations or remedy any business hurdles. It’s akin to having a consultant on your side.
A BDC’s portfolio companies will generally be small- to medium-sized, but can also include larger companies if they’re distressed. As such, a BDC will tend to be higher-risk. To compensate for the added risk, this kind of company will generally offer high yields and the possibility of delivering high-potential total returns for the income investor.
BDCs should benefit from the business-friendly Trump administration due to less regulation and a potential rise in business activity that would drive loans and investments.
For the everyday retail investor, the opportunity to buy a BDC also provides an alternative investment opportunity that was previously only available to the wealthy.
Goldman Sachs BDC Inc (NYSE:GSBD) is a $1.44-billion-market-cap BDC that is well managed and has provided steady dividends and the potential for some capital appreciation potential.
This BDC was formed by Wall Street heavyweight Goldman Sachs Group Inc (NYSE:GS), which holds 6.51 million shares of GSBD stock.
Goldman Sachs BDC focuses on middle-market companies in the U.S. Its objective to deliver income and some capital appreciation. (Source: “About Goldman Sachs BDC, Inc.,” Goldman Sachs BDC Inc, last accessed January 16, 2025.)
As of September 30, 2024, the BDC had investments in 167 portfolio companies, compared to 144 portfolio companies as of December 31, 2023. (Source: “Goldman Sachs BDC, Inc. Reports September 30, 2024 Financial Results and Announces Quarterly Dividend of $0.45 Per Share Company Release,” Goldman Sachs BDC Inc, November 7, 2024.)
Chart courtesy of StockCharts.com
Success Reflected in Steady Results
Goldman Sachs BDC reports its revenues as total investment income and earnings as net investment income.
The BDC’s total investment income came in at $454.9 million in 2023, up from $357.5 million in 2022 and $347.0 million in 2021. (Source: “Goldman Sachs BDC, Inc. Reports December 31, 2023 Financial Results and Announces Quarterly Dividend of $0.45 Per Share Company Release,” Goldman Sachs BDC Inc, February 28, 2024.)
In the third quarter of 2024, Goldman Sachs BDC reported total investment income of $110.4 million, versus $108.6 million in the second quarter. (Source: Goldman Sachs BDC Inc, op. cit.)
Analysts expect the company to report total investment income of $435.9 million in 2024 and $418.0 million in 2025. The expected decline shouldn’t be a surprise given the nature of the business, where success depends on the performance of its investments in the portfolio companies. (Source: “Goldman Sachs BDC, Inc. (GSBD),” Yahoo! Finance, last accessed January 16, 2025.)
On the bottom line, Goldman Sachs BDC reported net investment income of $2.28 per basic and diluted share in 2023. This compared to $2.24 and $2.33 for 2022 and 2021, respectively.
And with the anticipated drop in net investment income, analysts expect net investment income to contract to $2.20 per basic and diluted share in 2024, followed by $1.75 and a high estimate of $1.97 per basic and diluted share in 2025. (Source: Yahoo! Finance, op. cit.)
In the third quarter, net investment income was $0.58 per basic and diluted share, $0.03 above the consensus. This was the third straight quarterly beat.
Goldman Sachs BDC Inc held $1.88 billion in total debt at the end of September, which is typical of the use of leverage in the BDC business. (Source: Yahoo! Finance, op. cit.)
Generating Steady Dividend Since 2015
With Goldman Sachs BDC stock, you get a steady quarterly dividend of $0.45 per share that has been in place since June 2015.
The forward dividend was high at 14.66%, with Goldman Sachs BDC stock trading at $12.28 as of January 16.
The Lowdown on Goldman Sachs BDC Stock
Goldman Sachs BDC stock is ideal for income investors seeking high-yielding, steady income.
The lack of dividend growth may not be ideal for everyone, but the current high yield is still well above what you get from treasuries, bonds, and the vast majority of dividend stocks. Plus, the BDC is managed by a top Wall Street firm with a proven track record in investments.