10% Yields, Blue Chip BDC: Blue Owl Capital

seekingalpha11-20

Stop selling your assets to retire, let your assets pay you instead!Flip the script on the classic retirement formula and find more success than before.BDCs provide essential liquidity to the U.S. ...

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OBDC is operated by Blue O","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":"10%收益率，蓝筹股BDC：Blue Owl Capital","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"OBDC":0.9},"content_text":"Stop selling your assets to retire, let your assets pay you instead!Flip the script on the classic retirement formula and find more success than before.BDCs provide essential liquidity to the U.S. economy while rewarding shareholders.   AndreyPopov  Co-authored by Treading Softly.  \"It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.\" – Abraham Maslow.  Abraham Maslow, famous for his hierarchy of needs, is also known for developing a concept called “Maslow's Hammer.” Maslow's hammer refers to the idea that we are naturally more biased to using tools that we have a strong familiarity with, even if they're not the best tool for the solution. If someone is very adept and skilled with a hammer, they may feel that situations that would best be solved with a screwdriver would be best solved with their hammer because they are more adept with it. Interestingly, we can apply this concept of cognitive bias to investing in the stock market. Most investors are biased towards growth investing because that's all they've ever heard about or have been taught. It's a widespread bias within our financial education – however small that may be within the general society – that retirement planning revolves strictly around building up a massive pile of savings only for you to orderly dismantle it when you reach retirement years. Interestingly, this focus on building up a stockpile to tear it apart in retirement can be readily attributed to the massive decline in actual retirement savings by younger individuals. Many younger individuals simply believe that they can put off their retirement savings and just save more when they earn more. Others don't fully understand the concept of building up a pile just to tear it down when their daily life exposes them to the need to receive money regularly and budget that money – another disappearing knowledge gap. This is one reason why within High Dividend Opportunities we use my unique Income Method. Instead of building up a stockpile of money to then ration it out throughout your golden years, we build up a pile of magnificent companies that pay me with a steady, glorious income stream. Instead of replacing my paycheck with rationed portions of my life savings, I replace my paycheck with a steady supply of dividend checks. Instead of a company paying me for work, I have companies paying me for ownership. I can budget accordingly and enjoy the golden years with ease and happiness. Today, I want to look at a company that is well worth being in the conglomeration of companies that pay you. Not only do they pay strong double-digit yields today, but can provide you with income to live off for decades to come. Let's dive in! Blue Owl Is a Blue Chip BDC Blue Owl Capital Corporation (NYSE:OBDC), yielding 9.9%, is a business development company, BDC, that focuses on providing loans, liquidity, and management assistance to middle-market firms within the United States. OBDC is operated by Blue Owl (OWL) and trades publicly along with its sister BDC Blue Owl Capital Corporation III (OBDE). OBDC reported earnings recently and NII ticked down to $0.47 (vs $0.48 in Q2), book value ticked down to $15.28 (vs $15.36 in Q2). The primary impact on earnings is lower interest rates. OBDC makes money by borrowing at fixed rates and lending at floating rates, so its earnings will fluctuate with interest rates. For the past two years, OBDC has been paying a “supplemental” dividend. Whenever we see the word “supplemental” attached to a dividend, we should understand that management is communicating to us an expectation that the dividend will not be permanent. In OBDC's case, the supplemental dividends are the excess earnings driven by higher interest rates that they do not anticipate being sustainable if interest rates come back down. For Q4, OBDC has announced a $0.05 supplemental and $0.37 regular dividend. We expect OBDC to continue to pay supplemental dividends, but the amount will vary from quarter to quarter, and we expect them to gradually get smaller over the next year. The pace of the decline will be directly impacted by whether the Fed cuts more or less aggressively. OBDCs credit quality has remained consistent, with 0.7% of its investments on non-accrual by fair value. Source. OBDC Q3 2024 Presentation 7.3% of borrowers are performing below expectations at underwriting. This compares favorably to 9% last quarter and 10.7% at the end of 2023. OBDC is merging with its sister company, OBDE. The merger is expected to occur in Q1 2025 pending shareholder approval at a special meeting in January. We anticipate that the merger will be approved and that it will be positive for both companies. The BDCs have the same manager, so there is a lot of overlap in their holdings. OBDC will see an improvement in credit quality as OBDE has a higher allocation to first-lien debt. Both companies will benefit from economies of scale. OBDC Q3 2024 Presentation OBDE has a higher average credit quality, so when the merger closes that will improve credit quality and should also be a positive for cash flow. As a reminder, whenever there is a corporate action in our portfolio, members can find our opinion. It's an easy one-stop shop when you are asked to vote on something, you can find our opinion and links to any articles if we discussed the situation more in-depth so that you can arrive at your opinion. For OBDC and OBDE, we see the merger as favorable for shareholders, and anticipate that the combined company will produce higher earnings and pay more dividends. Conclusion OBDC has proven itself to be a blue-chip BDC. When it first came to market, it was one of the largest publicly traded BDCs in the market, and it continues to be among the largest. With the merger with OBDE, its size will only continue to grow. The management team overseeing it has been able to prepare the company to weather any changes in interest rates or even the impacts from higher defaults that would occur during a recession. A lot of this comes from their ability to focus on first lien debt – Senior debt that provides a greater level of protection. We do expect that the supplemental dividends will go away over time, especially as interest rates continue to fall, yet we expect that the regular dividend will not only be sustained but maintained over the long term. A BDC will increase its regular dividends or provide supplemental dividends when necessary, but the goal should always be that the book value remains stable or growing over the long run and, therefore, the dividends are sustained or growing. When it comes to retirement, you need a steady income, and being actively exposed to the economy, which historically grows over time, is a great way to receive that income. Just because you retire doesn't mean that you should disengage from society or the economy, but it also means that you likely won't want to be actively working every single day to earn an income. By using a BDC like OBDC, you can enjoy exposure to the economy, collect a great steady income, and not have to punch the clock a single day at work.  That's the beauty of my Income Method. That's the beauty of income investing.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","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/2484419074"}