How Business Development Companies Generate Their Sky-High Dividends
If you dig deep enough, the trade-off isn't exactly unclear.
How Business Development Companies Generate Their Sky-High Dividends
Overview
Have you ever heard the saying "if something seems too good to be true, it probably is?" The older (and therefore wiser) you are, the more likely you are to agree with the ancient adage. It's true within the investing arena as well; if a stock's suggested upside doesn't seem realistic, you're probably going to steer clear of it.
However, there are instances where something seemingly unlikely is not only true, but actually reasonable once you understand the rest of the story -- and the risk.
Details
Case in point: Business development companies like Ares Capital (NASDAQ: ARCC), Prospect Capital (NASDAQ: PSEC), and Main Street Capital (NYSE: MAIN) offer shockingly high dividend yields, often in excess of 10%. It makes sense, however, when you fully understand these organizations' underlying business model.
Source
Originally published at www.fool.com.
