Business Development Companies (BDCs) must distribute at least 90% of taxable income, mostly as ordinary income, which is heavily taxed in taxable accounts. Three BDCs—Ares Capital, Hercules Capital, and Capital Southwest—offer high yields near or above 9%, but their distributions are taxed up to 37% federally if held in taxable accounts. Holding these BDCs in a Roth IRA shelters the income from taxes, potentially saving thousands annually and compounding tax-free over decades. Investors should consider moving BDC holdings to Roth accounts or doing Roth conversions to maximize after-tax income and growth potential.
Investors holding high-yield BDCs, REITs, and MLPs in taxable accounts face significant tax costs because their dividends are taxed as ordinary income rather than qualified dividends. For example, at a 24% federal tax bracket, $50,000 in dividend inc...
Public business development companies (BDCs) like ARCC and OBDC are currently trading at significant discounts to their book value, reflecting ongoing risk aversion despite stable internal performance. This has created a roughly 20% valuation gap bet...
Certain high-yield investments like midstream MLPs and business development companies (BDCs) pay distributions taxed as ordinary income, which can lose about 24% to federal taxes for investors in the 24% tax bracket. Placing these investments inside ...
