Cheap Stocks to Buy Under $10 – BlackRock Kelso (BKCC)
BlackRock Kelso Capital Corp. (BKCC) is a business development company, or BDC, which generates revenue from investments in and loans to midsized companies. As that capital generates returns, BlackRock Kelso shares generate big dividends.
Of course, that means BKCC lives and dies by its underlying investments. You can look into its full list of investments here for more detail.
Obviously, nothing is for certain, and an economic downturn would take a bite out of many underlying investments in the BlackRock Kelso portfolio. And it might be a double whammy, since dividends could suffer from underperformance in the underlying investments, too. For instance, distributions went from 43 cents a quarter at the end of 2008 to just 16 cents in 2009 thanks to the downturn.
But it swings both ways — and in good times, BlackRock Kelso really puts the pedal down. The current yield of more than 11% is calculated from 26 cents paid quarterly — yet BKCC paid 32 cents a share as recently as 2010. If the economy turns a corner and more midsize companies look to expand, BlackRock Kelso will benefit handsomely.
Furthermore, higher interest rates in 2014 rates may mean better margins on BKCC loans and thus bigger profits.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via @JeffReevesIP.