UBS E-TRACS Wells Fargo Business Development Company ETN (BDCS)
For many midsized companies, finding sources of capital can actually be quite difficult. Too small to issue a full corporate bond and too large to go their local bank branch and request a loan, many midsized firms often turn to business development companies (BDCs) to get the funding they need.
Investors can basically think of BDCs as publicly traded, private equity or venture capital firms. The kicker is that, like REITs, BDCs must kick out at least 90% of their income back to shareholders as dividends. That results in some large dividend yields for the stocks.
The UBS E-TRACS Wells Fargo Business Development Company ETN (BDCS) tracks 32 business development companies, including industry stalwarts like Apollo Investment (AINV) and BlackRock Kelso Capital Corporation (BKCC). If those names sound familiar, they should. Many of the country’s biggest private equity players have publicly traded BDC divisions.
The key selling point for investors is that BDCS features a large dividend yield of 7.25%. As a bonus, BDCS’ underlying index has managed to produce a huge 213% total return over the past five years. In comparison, the S&P 500 index only managed to produce 128%.