| Earn
9.8% Dividend Yields by Investing in this Business Development
Company |
Published: April 27, 2006
Launched in 2004, Apollo Investment Crop. (AINV, $18.50) is one of
about a dozen publicly-traded Business Development Companies (BDCs).
Essentially, BDCs are publicly traded private equity firms that buy
undervalued businesses, restructure them, and then sell them for a
profit. Private equity firms are the exclusive domain of
"accredited investors" -- institutional or wealthy investors.
By contrast, BDC's are available to all types of investors, both large
and small.
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AINV provides loans and takes an equity stake in a wide variety of
businesses, ranging from warranty provider NEW Customer Service to
U-Haul parent Amerco. The company is on the fast track, with per share
earnings expected to more than triple this year and to continue growing
at a +10% clip next year.
The firm recently raised nearly $300 million in equity capital, which it
plans to use to both reduce debt and expand its investment portfolio. It
also expanded its line of credit to $1.25 billion to help fund future
investments. The expected growth in investment income will be passed on
to shareholders. As a BDC, the firm also enjoys a number of tax
advantages as long as it distributes most of its income to shareholders
by paying dividends.
Management fees do take a big bite out of profits, however. Managers
receive a 2% management fee and 20% of any gains if the portfolio
generates at least a +7% return.
Still, the firm's quarterly dividend has grown at a remarkable clip,
increasing from just 5 cents per share to 45 cents per share since AINV
initiated dividend payments in September 2004. The stock has also been a
strong performer, generating total returns (share price and dividends)
of +28% last year, compared with less than +5% for the S&P 500. With
a current quarterly dividend payout of 45 cents per share, AINV boasts
an annual payment of $1.80 and a generous dividend yield of 9.8%, making
the stock a solid choice for high-yield investors.
Good investing!
Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com
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Carla
Pasternak draws on a variety of financial backgrounds to make profitable
calls on income-generating stocks for her readers.
Carla has
been employed in the investment industry for more than two decades. In
addition to her work as a writer for several other nationally recognized
financial publishers, her previous experience includes a position as
President of a well-respected investor relations firm. She has also been
writing shareholder reports for public companies (annual reports,
speeches, corporate profiles, slide shows, etc.) since 1980.
A highly
successful investment analyst, Carla specializes in high-yield,
income-paying stocks. In that pursuit, she's always mindful to select
companies that not only pay rich dividends, but that also have the
potential to deliver strong long-term capital gains.
On the
educational front, Carla holds both MBA and Ph.D. degrees. When she's
not watching the market, she's teaching business courses at the college
level and managing several million dollars in portfolio assets.
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