Blue Owl Capital: A Rock-Solid 11% Yield For Your Dividend Portfolio

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Blue Owl Capital comfortably covered its $0.37 base dividend with net investment income in 3Q24 and paid a $0.05 supplemental dividend, reflecting a stable payout ratio.The BDC's portfolio quality ...

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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: A Rock-Solid 11% Yield For Your Dividend Portfolio\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-11 18:04 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4735983-blue-owl-capital-stock-solid-yield-for-your-dividend-portfolio><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Blue Owl Capital comfortably covered its $0.37 base dividend with net investment income in 3Q24 and paid a $0.05 supplemental dividend, reflecting a stable payout ratio.The BDC's portfolio quality ...</p>\n\n<a href=\"https://seekingalpha.com/article/4735983-blue-owl-capital-stock-solid-yield-for-your-dividend-portfolio\">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":"OBDC","symbol_name":"Blue Owl Capital Corporation","start_time":0,"source_url":"https://seekingalpha.com/article/4735983-blue-owl-capital-stock-solid-yield-for-your-dividend-portfolio","article_id":"2482820510","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/912018754/image_912018754.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482820510","pubTimestamp":1731319450,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Blue Owl Capital comfortably covered its $0.37 base dividend with net investment income in 3Q24 and paid a $0.05 supplemental dividend, reflecting a stable payout ratio.The BDC's portfolio quality imp","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"OBDC":"Blue Owl Capital Corporation","BK4135":"资产管理与托管银行"},"translate_title":"Blue Owl Capital：您的股息投资组合的11%收益率坚如磐石","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"OBDC":0.9},"content_text":"Blue Owl Capital comfortably covered its $0.37 base dividend with net investment income in 3Q24 and paid a $0.05 supplemental dividend, reflecting a stable payout ratio.The BDC's portfolio quality improved significantly, with the non-accrual ratio dropping to 0.7%, enhancing its investment appeal.Despite potential yield compression due to central bank rate cuts, Blue Owl Capital's 11% dividend yield remains safe and attractive for passive income investors.Trading at a 3% discount to NAV, Blue Owl Capital offers a compelling investment proposition with strong total investment income and robust loan quality.   Klaus Vedfelt Blue Owl Capital Corporation (NYSE:OBDC) is a reliable dividend-paying business development company that once again comfortably covered its base dividend of $0.37 per share per quarter with net investment income in the third quarter. The BDC also paid a supplemental dividend of $0.05 per share and has a very stable dividend pay-out ratio. Blue Owl Capital’s non-accrual ratio decreased substantially in 3Q24, highlighting improved portfolio quality. With a 3% discount to net asset value available for passive income investors, Blue Owl Capital makes a compelling investment proposition. My Rating History My last stock classification of Blue Owl Capital was Buy when I last reviewed the business development company in August. My classification is unchanged after Blue Owl Capital’s latest earnings as I see potential for growth in net investment income, particularly as the central bank is apparently taking a slow approach to cutting key interest rates down, which should help Blue Owl Capital defend its NII. Moreover, the business development company benefits from a well-performing loan portfolio. Portfolio Review, Investment Quality And Dividend Pay-Out Metrics Blue Owl Capital is a Senior Secured Loan-focused business development company with investments allocated to a variety of loan products. In the third quarter, Blue Owl Capital’s total investments amounted to $13.4 billion, up 1% QoQ. The majority of the business development company’s portfolio assets were First Liens, which are the ‘safest’ forms of debt a BDC can invest into as they are highly collateralized. A total of 76% of investments were Senior Secured First Liens with the remainder including Second Liens (5%), Unsecured Debt (2%), Equity (14%), including both common and preferred, and Joint Ventures (3%).   Portfolio Review (Blue Owl Capital Corporation)In terms of new originations, the third quarter exhibited was a moderately solid quarter. Blue Owl Capital made net new investment commitments of $1.15 billion, up 130%. Investment commitments do tend to be volatile, however, given the changing needs of companies for investment capital, so I wouldn’t want to assign too much importance to this number. Net funded investment activity, which accounts for gross fundings and subtracts for repayments, was negative $33.8 million. New investments commitments were predominantly First Liens (97%), with the remainder going to Joint Ventures and Equity.   Net Funded Investment Activity (Blue Owl Capital Corporation)Before I dig into Blue Owl Capital’s dividend pay-out metrics, I want to quickly touch on the BDC’s portfolio quality, which remained excellent, and actually improved, in the third quarter. The business development company had a non-accrual ratio, which measures underperforming and impaired loans, of 0.7%, down by half from 1.4% in the prior quarter. This credit quality makes Blue Owl Capital comparable to Ares Capital Corp. (ARCC) whose non-accrual ratio in 3Q24 was 0.6% based on fair value. Blue Owl Capital’s portfolio did not only perform well in terms of loan quality (non-accruals), but also delivered growth in total investment income. In 3Q24, the business development company earned $406 million in total investment income, up 2% YoY. Though Blue Owl Capital’s income is growing, predominantly because of higher interest income and fees, there is a risk of lower income on the horizon relating to the BDC’s floating-rate investments. As of September 30, 2024, 96% of total debt investment were made in floating-rate loans whose income is primed for a reset to the downside in a market that sees rate cuts. The central bank just announced a 25 bps cut to its key interest rates, which will affect business development companies like Blue Owl Capital detrimentally.   Total Investment Income (Blue Owl Capital Corporation)We have already seen downward pressure on Blue Owl Capital investment yields. In 3Q24, the main portfolio yield, which includes debt and income-producing securities, slid to 11.5%, down 0.4 percentage points QoQ. With the central bank likely seeing a steady pace of rate cuts in the near future, I would anticipate Blue Owl Capital’s yield to compress as well.   Portfolio Highlights - Net Interest Margin (Blue Owl Capital Corporation)Stable Dividend Pay-Out Ratio Blue Owl Capital earned $0.47 per share in net investment income in the third quarter, which compares to a stable base dividend of $0.37 per share. This reflects back to us a 3Q24 dividend pay-out ratio of 79%. Blue Owl Capital also paid out a $0.05 per share supplemental dividend in the last quarter, which brought the total dividend pay-out ratio to 89%. All dividends considered, Blue Owl Capital paid $1.70 per share in the last twelve months, including $0.24 per share in supplemental dividends, which equates to a pay-out ratio of 88%. The pay-out ratio, including special dividends, has remained remarkably stable in the last year and, in my view, Blue Owl Capital offers passive income investors a very safe 11.3% dividend yield.   Pay-Out Ratio (Author Created Table Using BDC Information)Compelling NAV Multiple Blue Owl Capital’s net asset value fell $0.08 per share QoQ in the third quarter: As of September 30, 2024, the business development company’s net asset value stood at $15.28 per share. With the stock presently selling for $14.93 per share, we are seeing the application of a 3% discount to net asset value that, I think, is not justified based on the improvements in loan quality and strong total investment income. In my view, Blue Owl Capital is deserving of a 1.1x NAV multiple, which equates to an intrinsic value of $16.80. Ares Capital and Blackstone Secured Lending Fund (BXSL), which are leading the sector in terms of loan quality, are selling for net asset value multiples of 1.09x and 1.17x. Data by YChartsWhy The Investment Thesis Might Disappoint Blue Owl Capital is a floating-rate business development company and, as such, its net investment income potential is ultimately dependent on the policy of the central bank. The central bank’s chairman Jerome Powell this week lowered the short-term interest rate by a quarter percentage point to a new range of 4.50-4.75% which points to softer net interest margins moving forward. Thus, I do anticipate Blue Owl Capital to earn less interest income on its floating-rate loans, but I don’t see any risks to the dividend for now. My Conclusion Blue Owl Capital covers its dividend with net investment income, produces a very stable dividend pay-out ratio, has strong portfolio quality and is growing its originations. Blue Owl Capital should be able to sustain its dividend and continue to pay supplemental dividends. The non-accrual ratio dropped in half in 3Q24, which was a positive, while the decrease in net interest margins was a negative. The BDC’s stock is selling for a 3% discount to net asset value, and the dividend pay-out metrics don’t signal any dividend payment issues.  The 11% yield, as far as I am concerned, is very safe here for passive income investors and I reaffirm my stock classification of ‘Buy.’","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/2482820510"}