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Yields Up To 9.9% That Rich Guys Don’t Want You To Know About

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Not yet as rich as you always wanted to be? Don’t worry, because today we’re going to dial you in for some “rich guy” dividend favorites that’ll pay you up to 9.9% every year.

Private equity is a lucrative and secretive world. It’s often limited to accredited investors, which means these funds require you to have $200,000 or more in annual income to qualify.

If you’re living on dividends alone, this might be challenging. Fortunately, there are some private equity plays that you can buy just like individual stocks. They trade for as cheap as $12 per share and they’ll pay you dividends from 8.8% to 9.9% along the way:

Contrarian Outlook

Contrarian Outlook

Private equity (PE)—funds that can invest in the equity and debt of privately held companies, which we typically can’t get our hands on—is generally touted as outperforming the stock market.

The American Investment Council, which advocates for private investment, points out that research from the 1990s and early 2000s showed that “private equity outperformed public markets by 3 to 4 percent each year,” and a 2019 paper investigating more recent “vintage years” finds that “that private equity continues to generate returns that are 2 to 3 percent above the returns of public markets.”

The downside? Privately held private equity firms aren’t exactly easy to tap, and you typically need to have seven digits to get in.

But here’s a back door that you and I can access. We can buy PE-esque investments just like regular stocks with a single-click! The trick is handful of little-known publicly traded companies called business development companies (BDCs).

Congress created BDCs in the 1980s to spur investment in America’s small and midsize businesses, the same way they created REITs in the ‘60s to help mom ‘n’ pop investors tap the real estate markets. And like REITs, BDCs get a generous tax break—if they dole out 90% or more of their profits as dividends to you and me.

Thus, business development companies not only let us access a big pool of investments you and I otherwise couldn’t otherwise dream of accessing, but also deliver sky-high yields that are among the highest you can find in the stock market. The caveat, of course, is that they do come with heightened risk, and not all BDCs are gems.

Today, I’ll show you three notable BDCs—yielding between 8.8% and 9.9%—that should be on your radar screen.

PennantPark Floating Rate Capital (PFLT)

Dividend Yield: 9.7%

Let’s start out with a yield juggernaut: PennantPark Floating Rate Capital (PFLT), which will get investors awfully close to a double-digit yield at current prices.

PennantPark provides access to middle market direct lending with, as the name implies, a heavy focus on floating-rate loans, though it’ll invest anywhere across the capital structure (senior secured debt, subordinated debt and others).

Its primary target is private equity sponsor-backed companies with $10 million to $50 million in EBITDA. It avoids capex-heavy businesses, as well as fickle industries such as fashion and restaurants, but it still has plenty of sectors to play with. Portfolio companies include the like of primary-clinic operator Cano Health, marketing services provider InfoGroup, and WalkerEdison, whose furniture can be found online via companies such as Amazon.com (AMZN), Target (TGT) and Home Depot (HD).

PennantPark typically leans toward the low-risk but low-reward end of the BDC spectrum, which historically has served it just fine. However, the BDC’s last earnings report raised some credit-quality concerns. The company reported that four of its portfolio companies were on “non-accrual,” which essentially happens when a payment is more than a month overdue, or there’s some other concern about a company’s ability to make a payment.

The BDC was subsequently nailed in May on the news. That has me wary. And the floating-rate nature of its loans, while attractive during periods of rising rates, isn’t a significant advantage right now.

New Mountain Finance

Dividend Yield: 9.9%

New Mountain Finance (NMFC) targets companies middle-market companies, too, investing between $10 million to $50 million across the debt spectrum in businesses that generate annual EBITDA between $10 million and $200 million.

NMFC likes to say that it invests in “defensive growth” industries. It’s a silly, contradictory term, sure. But the qualities it covets in its portfolio companies are, in fact, pretty attractive: high barriers to competitive entry, recurring revenue, strong free cash flow and niche market dominance.

To be fair, New Mountain, like PennantPark, is heavily weighted toward floating-rate loans, which make up 93% of the portfolio. But NMFC is a few steps in the right direction. Its credit quality is stellar – only eight portfolio companies have gone on non-accrual since inception in 2008, and there were no new non-accruals over this past quarter. Better still, the company is a bastion of consistency when it comes to covering its healthy dividend with net interest income (a core measure of profitability for BDCs).

New Mountain, which trades at only a sliver of a premium to its net asset value right now, still should be fine in the current environment. Keep this BDC in mind should the Fed’s hawks ever take over again.

Ares Capital (ARCC)

Dividend Yield: 8.8%

Ares Capital (ARCC) is a slightly more modest yielder compared to the previous two picks, and you likely won’t snag it for a significant discount. But that’s OK—ARCC is worth a small premium.

I’ve beat the drum on ARCC a few times, including in February 2019, but also going back more than two years, in January 2017. I said at the time that the company’s investment spread, as well as a $3.4 billion merger with American Capital, “should benefit ARCC in just about any market environment,” and that “in short, ARCC is going places.”

Ares Capital, Wall Street’s largest BDC, invests primarily in first and second lien loans and mezzanine debt of middle-market companies. A high priority is placed on “market-leading companies with identifiable growth prospects that can generate significant cash flow.” Its portfolio of roughly 345 companies touches numerous sectors, including business services, food and beverage, healthcare, IT and light manufacturing.

Ares’ core earnings and net realized gains have exceeded dividends every year since 2011, by increasingly wide margins. In fact, the company’s operational performance has been so robust that it has hiked its payout twice since this time last year.

Bottom line: ARCC is a standout in what typically is a difficult industry to invest in.

However, I’m not sure I’d commit capital to this stock right now. Given its recent run up, I’d like to see a pullback for a lower risk entry point.

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, click here for his latest report How To Live Off $500,000 Forever: 9 Diversified Plays For 7%+ Income.

Disclosure: none

I graduated from Cornell University and soon thereafter left Corporate America permanently at age 26 to co-found two successful SaaS (Software as a Service) companies.

Source: Yields Up To 9.9% That Rich Guys Don’t Want You To Know About

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Investors Join Sinclair’s Big Bet On Sports And Sports Gambling

Sinclair Broadcast Group Inc. headquarters in Cockeysville, Maryland. (Photographer: Andrew Harrer/Bloomberg)

Sinclair Broadcast Group Inc. headquarters in Cockeysville, Maryland. (Photographer: Andrew Harrer/Bloomberg)

© 2018 BLOOMBERG FINANCE LP

Investors were loving Sinclair Broadcast Group’s big bet on the future of sports, and sports gambling, sending the company’s stock up 30% in early trading on Monday.

The deal, announced Friday afternoon, would see Sinclair and partner Byron Allen of Entertainment Studios pay Disney $10.6 billion for 21 regional sports networks around the country. Shares shot up in early trading by more than $13 a share, to as much as $58.84.

Federal regulators forced Disney to divest the sports networks as part of completing its $71.6 billion acquisition of most of 21st Century Fox.

Previously, Sinclair joined with the New York Yankees and Amazon in the $3.5 billion acquisition of a 22nd RSN, the YES Network in New York. Sinclair also partnered with the Cubs baseball team to launch Marquee Sports Network in Chicago. That channel will launch in 2020.

It’s a big bet, part of a big transformation for Sinclair, which last summer was stunned when regulators blocked its $3.9 billion acquisition of Tribune Media. Sinclair, with about 200 stations under its control, would have had too large a share of the broadcast sector, regulators ruled.

At year’s end, rival station group Nexstar offered more than $6 billion for Tribune in a deal that looks likely to gain approval.

But the sports deals mark a major new direction for Sinclair. It marks a major bet on the likelihood that sports gambling soon will be widely legal across the United States, and hugely lucrative for those outlets that possess access to game and game information, as well as technology for easily betting on those games.

“This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue streams with high-quality assets that are driving live viewing,” Ripley said in announcing the deal. “We also see this as an opportunity to realize cross-promotional collaboration, and synergistic benefits related to programming and production.”

A U.S. Supreme Court decision has cleared the way for state-by-state legalization of gambling in the United States. New Jersey and a handful of other states already have jumped in, reaping big paydays so far.

The main holdup for further gambling expansion likely will be efforts by the major sports leagues, led by the NBA, to get a cut of the take. They’re pushing provisions in legalization bills for so-called “integrity fees.”

Those issues will almost certainly get worked out, given projections that legalized gambling across most of the U.S. could generate tens of billions of dollars.

And that’s what Sinclair is betting on with the RSN acquisitions. Ripley told Reuters on Sunday that his company would be open to licensing some of the sports content it acquired in the deal to outlets such as Amazon, Disney and AT&T as those companies jostle for position in the increasingly competitive online-streaming space.

“There is only going to be more competition and more interest for key assets like this in the future,” Ripley said. “We have an interest in as broad a distribution as possible.”

Ripley called the RSN deal a bargain. The price is certainly far below the estimates of $15 billion to $20 billion that most analysts had predicted for the portfolio. But the networks could be valuable for multiple reasons.

For instance, the company expects to profit from advertising about gambling, Ripley said.

He estimated industrywide, some $1.5 billion to $2 billion in new revenue would come in from sports book operators and other companies in the space.

Given broadcast advertising’s cyclical nature – it yo-yos up and down on election-year and Olympics/World Cup spending – that could be a big deal, especially because other ad revenues have been flat or slightly down in recent years.

Sinclair already owns The Tennis Channel, which holds rights to many of the major tennis tournaments held around the world.

And sports of all kinds – already a sticky, lucrative programming option given the willingness of fans to pay for access – is about to become even more lucrative with the increasing legalization of gambling.

As Sinclair CEO Christopher Ripley told me a few months ago, tennis is already the second-most wagered-upon sport in Europe, where gambling is widely legal. Soccer, of course, is No. 1.

Most of the tennis gambling “handle,” or amounts wagered, comes from in-game “prop” bets (who will win the next game or set, or how many aces will a player serve) rather than overall match outcomes, Ripley said.

The company already is working on technology that could be used to power in-game betting on its broadcasts, Ripley said.

Tennis, with its numerous breaks and game-match-set structure, is ideal for lots of prop bets. But many popular American sports, most notably football and baseball, but even more fluid and fast-paced sports such as basketball, can also become a lucrative source of legal betting.

The company also owns other sports properties, including online service Stadium, Ring of Honor Wrestling and high school sports programming on its local stations.

The deal also could boost Sinclair’s recently launched STIRR online service, which features local news and sports content from its broadcast stations that cover about 40 percent of the country. That Sinclair-owned content is woven in with entertainment and news content from about 30 partners in an ad-supported service. Initial viewership results for STIRR have reportedly been well above internal projections, but the company has not released any details.

Adding the RSN content to STIRR’s offerings, either directly as Viacom is doing on new acquisition Pluto.TV with limited versions of its cable properties, or as a premium upsell, could further boost STIRR.

Sinclair also has been a big proponent of ATSC 3.0, the new broadcast technology now being rolled out around the country. Among other capabilities, ATSC 3.0 will allow broadcast groups to provide addressable, targeted advertising to viewers, and to offer new channels and data services within the same bandwidth they’re now using to broadcast their main signal.

It’s easy to imagine those potential data services including sports-related information tied to the RSN networks’ teams, as well as gambling information.

STIRR’s focus on local news and sports represents a half-step toward an ATSC 3.0 future, but relies on widely available Internet-based technology.

ATSC 3.0 itself is not expected to have a substantial impact until at least 2021 because of the challenges of both broadcaster rollout and consumer adoption of newly capable TVs, external streaming boxes and even mobile devices.

Thanks for reading! Follow me on Forbes and the socials, and subscribe to my Bloom in Tech podcast on iTunes, Spotify, Overcast, Anchor.fm, SoundCloud and more. 

I’m a Los Angeles-based columnist, consultant, speaker, podcaster and consultant focused on the collision of tech, media and entertainment.

Source: Investors Join Sinclair’s Big Bet On Sports And Sports Gambling

Why You’re Not Investing Enough – Donna Divenuto-Ball

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In June, we asked readers to tell us what’s keeping them from investing more… or investing at all. As illustrated in this week’s chart, almost 28% feel like they’re investing what they can. But a whopping 43% either don’t know where to start investing… or won’t invest for fear of losing money. The remaining 30% or so had other reasons, including not having enough money, being in debt and not understanding the markets. A 2015 Bankrate Money Pulse survey found that 73% of the more than 1,000 Americans polled didn’t own stocks at all, primarily because they didn’t know enough about the markets… or didn’t have enough money to invest……..

Read more: https://www.investmentu.com/article/detail/59546/most-americans-dont-own-stocks#.W5iWfBEVS1s

 

 

 

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