Gladstone InvestmentNASDAQ: GAIN

Business development companies (BDCs) typically have high dividend yields, as they are required to distribute substantially all — at least 90% — of their earnings to shareholders. BDCs receive favorable tax treatment and, in return, they aren't allowed to retain earnings in the same way other companies are.

The most recent CPI report indicates a reduced likelihood of interest rate decreases, which is good news for the Business Development Company (BDC) industry. Gladstone Investment stands to gain from higher interest rates through increased investment income in their portfolio, which includes floating rate debt investments. With a current dividend yield of 6.8%, there is potential for further supplemental distributions in this market.

Gladstone Investment has potential for net asset value growth in a growing economy. The company's unique portfolio composition makes it a more risky, but potentially more rewarding investment for passive income investors. GAIN's ability to pay monthly dividends and special dividends has contributed to its stock price re-rating.

“The rent is too damn high!” That was the campaign slogan of New York City mayoral candidate Jimmy McMillan in 2010.

Rising interest rates have negatively impacted the value of income-producing investments, but business development companies have thrived. Gladstone Investment is one of the best BDCs in the business, beating peers and the S&P 500. If rates decline, GAIN can capitalize on a thawing IPO market.

While the top- and bottom-line numbers for Gladstone Investment (GAIN) give a sense of how the business performed in the quarter ended December 2023, it could be worth looking at how some of its key metrics compare to Wall Street estimates and year-ago values.

Gladstone Investment is a BDC with a focus on mid-cap businesses, but stands out with its investment in market-leading, profitable companies. Another deviation from the norm is GAIN's exposure to non-debt like investments, which comprise ~33% of its total portfolio. Yet, most of this is in safe preferred stocks. On top of this, GAIN has one of the best leverage profiles in the BDC sector - in terms of debt to equity level and the underlying structure of assumed borrowings.

Gladstone Investment has delivered a total return of nearly 20% in the past three months, outperforming the S&P 500. The company's stock price increase aligns with the growth in Net Asset Value, indicating confidence in the market. GAIN has successfully deployed fresh capital and realized significant returns through its strategic portfolio management.

There are many paths to profit on Wall Street, but one of the best remains to buy high-yield dividend stocks. The regular income stream from these companies can juice your portfolio's returns beyond what's possible from simple capital appreciation.