Golub Capital BDCNASDAQ: GBDC

Golub Capital BDC currently sports a 10% yield that is well-covered by their income. Golub Capital BDC remains a high-quality investment despite the slight increase in non-accruals during Q3 earnings. In this article, I discuss their latest earnings, and why the BDC remains a smart, attractive income play in the current market.

Golub Capital's base dividend will withstand a few more cuts, but investors have to be wary of the long-term risks and potential yield-on-cost. Despite the recent interest rate cut, GBDC's dividend coverage remains strong. GBDC trades around its net asset value, presenting an attractive valuation but with risks tied to interest rates, capital gathering, and economic conditions.

Golub Capital BDC trades at a slight discount to NAV despite strong dividend coverage and below-average leverage. Q3 2024 earnings report shows GBDC's non-accruals remain low, with leverage decreasing to 1.05x debt-to-equity. Adjusted NII per share significantly exceeds quarterly distribution, ensuring a robust 123% coverage.

Insider buying in Golub Capital BDC and Capital Southwest suggests potential for higher share prices, despite recent sector retraction due to anticipated lower interest rates. Golub Capital BDC offers an attractive investment with a 2.5% discount to NAV, a strong balance sheet, and significant insider buying. I currently rate them a buy. Capital Southwest still trades at a 51.4% premium above its NAV price, prompting me to assign a hold rating as the share price could pull back further in the near future.

Weak asset quality high rates and macroeconomic woes are likely to hurt Zacks SBIC & Commercial Finance industry players like Golub Capital (GBDC), Barings BDC (BBDC) and Crescent Capital (CCAP). Yet, a rise in financing demand across sectors is likely to aid.

Golub Capital BDC out-earned its base dividend with net investment income in 3Q24, post-merger with Golub Capital BDC 3. The stock offers an attractive 11% yield, solid credit quality, and is selling at a compelling net asset value multiple. Portfolio quality remains strong post-merger, with a 5% discount to NAV making it a buy for passive income investors.

Golub Capital BDC (GBDC) came out with quarterly earnings of $0.48 per share, missing the Zacks Consensus Estimate of $0.49 per share. This compares to earnings of $0.44 per share a year ago.

Golub Capital operates as a business development company that generates earnings through debt investments to middle market companies. Golub Capital's price fell by nearly 5% over the last week. This price retraction has increased the valuation appeal. GBDC offers a strong portfolio of debt investments, high dividend yield of 10.6%, and potential for growth despite lower interest rates.

Diversification is key for income investors, and BDCs offer a professionally managed portfolio of loans across different sectors. Golub Capital presents a buy-the-dip opportunity with strong operating fundamentals, high dividend coverage, and potential for market-beating returns with special dividends. GBDC is well-positioned with a conservatively managed portfolio and a more favorable fee structure toward shareholders.