Blue Owl Capital: Attractive 12% Yield

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Blue Owl Capital Corporation offers a compelling 12% dividend yield with strong coverage and trades below net asset value, making it an attractive income pick.The company primarily invests in low-risk...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBlue Owl Capital: Attractive 12% Yield\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-10 19:21 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4735831-blue-owl-capital-attractive-12-percent-yield><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Blue Owl Capital Corporation offers a compelling 12% dividend yield with strong coverage and trades below net asset value, making it an attractive income pick.The company primarily invests in low-risk...</p>\n\n<a href=\"https://seekingalpha.com/article/4735831-blue-owl-capital-attractive-12-percent-yield\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4135","symbol_name":"资产管理与托管银行","start_time":0,"source_url":"https://seekingalpha.com/article/4735831-blue-owl-capital-attractive-12-percent-yield","article_id":"2482252019","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/155095389/image_155095389.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482252019","pubTimestamp":1731237701,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Blue Owl Capital Corporation offers a compelling 12% dividend yield with strong coverage and trades below net asset value, making it an attractive income pick.The company primarily invests in low-risk","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4135":"资产管理与托管银行","OBDC":"Blue Owl Capital Corporation"},"translate_title":"Blue Owl Capital：12%收益率颇具吸引力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"OBDC":0.9},"content_text":"Blue Owl Capital Corporation offers a compelling 12% dividend yield with strong coverage and trades below net asset value, making it an attractive income pick.The company primarily invests in low-risk, floating-rate, senior-secured debt, with a well-diversified portfolio across over 200 companies and 30 industries.Internal risk ratings have improved, with over 90% of investments in top performance categories, indicating a positive trend in portfolio quality.Trading at a slight discount to net asset value and focusing on safer first-lien debt investments, OBDC presents a relatively attractive investment opportunity.ryasick  Article Thesis Blue Owl Capital Corporation (NYSE:OBDC) is a Business Development Company that offers a nice dividend yield of 12% with attractive dividend coverage. With an undemanding valuation -- Blue Owl Capital trades below net asset value -- the business development company looks like a compelling income pick at current prices. BDC Coverage I have not written about Blue Owl Capital Corporation yet, but I covered some other Business Development Companies in the past here on Seeking Alpha. If you are interested, feel free to check out some of my work on companies such as Main Street Capital (MAIN), Blackstone Secured Lending (BXSL), or Capital Southwest (CSWC). OBDC: Company Overview Blue Owl Capital Corporation is a relatively \"young\" Business Development Company, trading publicly since 2019, or for around five years. The company is, as the name suggests, managed by Blue Owl Capital Inc. (OWL) and trades with a market capitalization of close to $6 billion, making it one of the larger Business Development Companies investors can choose from (Blue Owl Capital Corporation describes itself as the third-largest public BDC). A solid size is advantageous when it comes to operating expenses, of course, as G&A costs, such as for the filing requirements of a publicly traded company, are distributed over a wider amount of gross profit. In general, these scale advantages are beneficial for a larger company's margins. Like other BDCs, Blue Owl Capital Corporation makes debt investments primarily, but it still makes sense to take a closer look. After all, different BDCs have different focus areas, and some BDCs mix mezzanine or equity tranches into their portfolio mix as well while others do not. OBDC's portfolio contains floating-rate debt investments primarily, which make up 96% of its debt investments, with a little more than 80% of its total assets being senior-secured debt -- a pretty low-risk asset class. Around three-quarters of its total investments are first-lien investments, the lowest-risk type of debt -- first-lien debt holders are paid back before even other senior debt holders. While OBDC's portfolio is heavily debt-focused, the company also has some non-debt investments. These include the company's 3% allocation to joint ventures, its 3% allocation to preferred equity, and its 11% allocation to common equity. Equity allocations do, in general, both increase risk as well as potential reward. In a positive scenario, equity investments can boost a BDC's earnings and net asset value growth nicely, but the risk of financial losses is also higher for equity investments, especially common equity investments, compared to debt investments. Whether one likes OBDC's allocation towards somewhat higher-risk investments such as its common equity portfolio thus depends on one's risk appetite. For a very conservative investor, a BDC with lower equity exposure, or no equity exposure at all, could be more suitable. That being said, OBDC is still mostly debt-focused, and its portfolio has been shifting towards safer investments such as first-lien debt investments over time: Over the last five quarters, more than 90% of new investments were in first-lien debt, with that ratio standing at a very high 97% during the most recent quarter. I thus do not think that OBDC is a \"risky\" type of BDC, although other BDCs are even less risky from an asset allocation point of view. Blue Owl Capital Corporation is well-diversified across different businesses, as there are a total of 219 portfolio companies as of the end of the third quarter. That is up from around 190 portfolio companies one year ago, thus OBDC has been adding new portfolio companies at a nice pace, further diversifying its business and thereby reducing concentration risk (which wasn't large one year ago, either). Over the last year, Blue Owl Capital Corporation has sold some of its assets, which is why its net fund investment activity was negative in Q3 and Q1 of 2024, as well as in Q4 and Q3 of 2023. In this year's second quarter, however, Blue Owl Capital Corporation's new investment fundings were so high (north of $2 billion) that the trailing twelve months number was still positive on a net basis, despite the reductions seen in the aforementioned quarters. Overall, OBDC's portfolio is worth $13.4 billion, with assets being distributed over more than 30 different industries. Diversification is thus not only strong on a company basis (with more than 200 different portfolio companies), but also on an industries or sector basis. The biggest industry across OBDC's portfolio is internet software and services, at around 11% of OBDC's total portfolio, with insurance being the second-biggest industry at around 8%. Food and beverage, where OBDC has an exposure of 7%, takes the number three spot. These three top industries are not correlated, which is good news from a diversification point of view. Looking at portfolio risks, we see that the average portfolio company's net loan-to-value ratio is 43%, which is a small improvement versus the previous quarter when this ratio stood at 44%. This means that the average portfolio company would have to experience a loss of more than 50% of its enterprise value before debt holders would be affected -- and even if that happens, first-lien loans such as the ones primarily held by OBDC would not necessarily feel an impact. That being said, the 43% loan-to-value ratio is an average across all portfolio companies, and thus there are, of course, portfolio companies with higher loan-to-value ratios (as well as ones with lower ratios). Also, OBDC's equity investments could get hurt more easily, as they would be affected earlier on if a portfolio company's enterprise value is negatively impacted. Looking at the company's internal risk ratings, we see the following: Blue Owl Capital Corporation internal risk ratings (OBDC presentation) Just 1.3% of OBDC's investments, at fair value, belong to the bottom two categories, with just 0.3% being in the worst category. More than 90% belong to the top 2 internal performance ratings. This is an improvement from the beginning of the year -- at the end of last December, only 89% of investments were in the top two categories, with 1.7% being in the bottom two categories. Things are thus getting better based on OBDC's internal risk ratings. While these internal risk ratings could theoretically turn out to be false, as there is no guarantee that management gauges risks correctly, I think it is reasonable to assume that management gauges risks more or less correctly. And even if there was a tendency to be too conservative or too optimistic, the trend is still a positive one, as ratios improved substantially so far this year. From time to time, Blue Owl Capital Corporation writes down some investments, which has had a minor negative impact on the company's net asset value during the most recent quarter. Without a write-down of $0.13 per share, net asset value would have risen during Q3, as net investment income of $0.47 per share was higher than the company's total dividends ($0.43 per share, which includes the $0.06 supplemental dividend). At the end of the third quarter, net asset value per share stood at $15.28, which brings us to the next point -- OBDC's valuation. Based on current prices, the company trades at a small discount to net asset value, as we can see in the following chart: Data by YCharts At 0.97x book value/net asset value, OBDC looks far from expensive. The ratio is close to the 2024 lows, while OBDC was substantially more expensive during spring and early summer. From a timing perspective, right now, thus, seems like a better-than-average time to buy OBDC, I believe. Is OBDC Attractive? Due to its equity investments, OBDC is not among the lowest-risk BDCs, but it is not high-risk at all, either. Net asset value has been relatively stable since the company went public, and the upcoming merger with Blue Owl Capital Corporation III (OBDE) should improve scale, further reducing risks and hopefully allowing for some margin improvements.  OBDC offers a dividend yield of almost 12% today, with solid dividend coverage (around 1.1x based on Q3 results), trades slightly below net asset value, and its portfolio risks have improved over the last year. With the company's new investments being focused on first-lien debt investments, the portfolio should continue to get safer over time. All in all, I think Blue Owl Capital Corporation is a relatively attractive investment at current prices.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2482252019"}