{"id":27842,"date":"2026-04-23T05:55:58","date_gmt":"2026-04-23T05:55:58","guid":{"rendered":"https:\/\/finderica.com\/?p=27842"},"modified":"2026-04-23T05:55:58","modified_gmt":"2026-04-23T05:55:58","slug":"how-safe-is-this-bdcs-13-yield","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=27842","title":{"rendered":"How Safe Is This BDC\u2019s 13% Yield?"},"content":{"rendered":"<div>\n<p>There\u2019s a lot of fear in the business development company, or BDC, world right now due to concerns over private credit. BDCs typically lend money to private companies.<\/p>\n<p><strong>Stellus Capital Investment <\/strong>(NYSE: SCM) is a BDC with more than $10 billion in invested capital across over 100 active investments.<\/p>\n<p>It lends between $20 million and $100 million to private companies that generate between $5 million and $50 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) in a wide variety of industries.<\/p>\n<p>Its portfolio includes\u2026<\/p>\n<ul style=\"padding: 0; margin: 0px 0px 0px 40px;\">\n<li style=\"margin: 21px 0px 21px 0px;\">Multiple loans to CARS Protection Plus, which provides insurance to dealers and service centers and is headquartered in Monroeville, Pennsylvania<\/li>\n<li style=\"margin: 0px 0px 21px 0px;\">A second-lien loan to Global Knowledge, an IT training provider located in Cary, North Carolina<\/li>\n<li style=\"margin: 0px 0px 21px 0px;\">A second-lien loan to Boston-based healthcare cost management company Zelis.<\/li>\n<\/ul>\n<p>Stellus currently pays a giant 13.6% yield. But is that sustainable?<\/p>\n<p>The cash flow metric we use for BDCs is net investment income, or NII.<\/p>\n<p>In 2025, Stellus\u2019 NII dipped from $15.6 million to $15.1 million.<\/p>\n<p>Any decline in NII is a no-no for Safety Net. The Safety Net model never wants to see cash flow falling. It results in an automatic penalty to the company\u2019s dividend safety rating.<\/p>\n<p>Making matters worse, Stellus\u2019 NII is expected to drop even further in 2026 to $13.7 million.<\/p>\n<p>In fact, it isn\u2019t forecast to return to where it was last year until at least 2029.<\/p>\n<p><a style=\"text-decoration: none;\" href=\"https:\/\/dkwegfj7whlol.cloudfront.net\/oxford\/wr\/20260422-Stellas.jpg\" data-rel=\"penci-gallery-image-content\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" class=\"aligncenter size-full img-fluid img-responsive cc_pointer\" style=\"width: 550px; max-width: 100%; display: block; margin: 0 auto;\" src=\"https:\/\/dkwegfj7whlol.cloudfront.net\/oxford\/wr\/20260422-Stellas.jpg\" alt=\"Chart: Stellus' Less-Than-Stellar Cash Flow\" width=\"550\" height=\"auto\"><\/a><\/p>\n<p>Meanwhile, Stellus hasn\u2019t been able to afford its dividend since 2022.<\/p>\n<p>Last year, it paid shareholders $45.3 million in dividends despite bringing in just $15.1 million in NII. That resulted in a payout ratio of 300%. (Remember, for BDCs, the Safety Net model wants to see payout ratios of below 100%.)<\/p>\n<p>In 2026, Wall Street expects payments of $49.7 million even though NII is forecast to drop to $13.7 million. That would be an even more dangerous payout ratio of 364%.<\/p>\n<p>Stellus pays a monthly dividend of $0.1133 per share, which comes out to a 13.6% yield.<\/p>\n<p>However, today\u2019s dividend is below what the company paid in 2023, 2024, and 2025, when shareholders received $0.1333 per share each month.<\/p>\n<p>Stellus also cut the dividend in 2020 during the pandemic.<\/p>\n<p>So we have a company with declining cash flow, a dividend that is multiples higher than its cash flow, and a track record of slashing the dividend.<\/p>\n<p>If there were a textbook example of a company whose dividend is likely to be cut, Stellus Capital Investment would be it.<\/p>\n<p>The dividend is not safe.<\/p>\n<p style=\"text-align: center;\"><strong>Dividend Safety Rating: F<\/strong><\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full\" src=\"https:\/\/dkwegfj7whlol.cloudfront.net\/oxford\/wr\/grade-guide.jpg\" alt=\"Dividend Grade Guide\" width=\"300\" height=\"auto\"><\/p>\n<p>What stock\u2019s dividend safety would you like me to analyze next? Leave the ticker in the comments section.<\/p>\n<p>You can also take a look to see whether we\u2019ve written about your favorite stock recently. Just click on the word \u201cSearch\u201d at the top right part of the <em>Wealthy Retirement<\/em> homepage, type in the company name, and hit \u201cEnter.\u201d<\/p>\n<p>Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.<\/p>\n<\/p><\/div>\n<p><script>\n  window.fbAsyncInit = function() {\n    FB.init({\n      appId      : '555402891275842',\n      xfbml      : true,\n      version    : 'v20.0'\n    });\n    FB.AppEvents.logPageView();\n  };\n  (function(d, s, id){\n     var js, fjs = d.getElementsByTagName(s)[0];\n     if (d.getElementById(id)) {return;}\n     js = d.createElement(s); js.id = id;\n     js.src = \"https:\/\/connect.facebook.net\/en_US\/sdk.js\";\n     fjs.parentNode.insertBefore(js, fjs);\n   }(document, 'script', 'facebook-jssdk'));\n<\/script><script>\n    (function(d, s, id) {\n      var js, fjs = d.getElementsByTagName(s)[0];\n      if (d.getElementById(id)) return;\n      js = d.createElement(s);\n      js.id = id;\n      js.src=\"https:\/\/connect.facebook.net\/en_US\/sdk.js#xfbml=1&version=v3.1&appId=555402891275842&autoLogAppEvents=1\";\n      fjs.parentNode.insertBefore(js, fjs);\n    }(document, 'script', 'facebook-jssdk'));\n  <\/script><br \/>\n<br \/><a href=\"https:\/\/wealthyretirement.com\/safety-net\/how-safe-is-this-bdc-13-percent-yield\/?source=app\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>There\u2019s a lot of fear in the business development company, or BDC, world right now due to concerns over private credit. BDCs typically lend money to private companies. Stellus Capital Investment (NYSE: SCM) is a BDC with more than $10 billion in invested capital across over 100 active investments. It lends between $20 million and<\/p>\n","protected":false},"author":2,"featured_media":27843,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[348],"tags":[10211,1282,1006],"class_list":{"0":"post-27842","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-retirement","8":"tag-bdcs","9":"tag-safe","10":"tag-yield"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/27842","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27842"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/27842\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/27843"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27842"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27842"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27842"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}