In this article, we will take a look at some of the best BDC dividend stocks to invest in.
Business Development Companies, or BDCs, play a key role in fueling the growth of smaller and mid-sized businesses across the US. Instead of relying on traditional banking models, they gather funds from investors by issuing shares and then channel that capital into a mix of loans and equity stakes in private firms. The idea is simple — to give these growing companies the financial boost they need to expand and thrive, while offering investors a chance to benefit from their success.
Fitch Ratings isn’t too optimistic about how Business Development Companies will fare in 2025. The firm expects the sector to face some rough patches, citing a crowded lending environment, weaker earnings, and pressure on dividends. On top of that, stubbornly high interest rates and ongoing economic hurdles — including the effects of tariffs on certain portfolio companies — could weigh on asset quality.
Even so, Fitch pointed out that not all BDCs are in the same boat. Those with stable outlooks are generally in a stronger position, thanks to solid asset coverage and access to unsecured funding. Others, however, may not be as lucky. Companies carrying negative outlooks could see further strain on their credit ratings if the quality of their assets continues to slip.
Given this, we will take a look at some of the best dividend stocks in the BDC sector.
Source: unsplash
Our Methodology
For this article, we examined Insider Monkey’s data of nearly 1,000 hedge funds as of Q2 2025. We focused on companies in the BDC sector and selected those with the most hedge fund investors tracked by Insider Monkey during that period. The stocks are ranked according to the number of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11. PennantPark Investment Corporation (NYSE:PNNT)
Number of Hedge Fund Holders: 2
PennantPark Investment Corporation (NYSE:PNNT) is a business development company that invests in mid-sized firms — the kinds that typically don’t receive much attention from traditional banks. Because of that, it’s often able to secure higher returns on the loans it issues. By the end of June, marking the close of its fiscal third quarter, the company said its debt investments were pulling in an average yield of about 10.4%.
What really sets PennantPark Investment Corporation (NYSE:PNNT) apart, though, is how its portfolio is built. Nearly every loan it makes — roughly 99% — comes with a variable rate. That worked out perfectly when the Federal Reserve started hiking interest rates from early 2022 through mid-2023 to fight inflation. As rates climbed, PennantPark’s returns jumped more than five full percentage points. Now that the Fed has started easing up, it’s doing so at a slow and steady pace, which has allowed the company to keep earning strong yields across its loan book.
PennantPark Investment Corporation (NYSE:PNNT)’s monthly dividend policy is also its strengths. Where a lot of companies offer dividends on a quarterly basis, PNNT pays out every month, which makes it one of the best dividend stocks in the BDC sector. Currently, it offers a monthly dividend of $0.08 per share and has a dividend yield of 14.66%, as of October 5.
10. Gladstone Capital Corporation (NASDAQ:GLAD)
Number of Hedge Fund Holders: 3
Gladstone Capital Corporation (NASDAQ:GLAD) focuses on providing both debt and equity financing to smaller, lower middle-market businesses. The firm puts its money mainly into secured first- and second-lien loans — the kind that come with a strong safety net — and focuses on companies that already generate consistent cash flow. It’s a strategy built around two core goals: keeping income steady and growing the value of its investments over time.
As a BDC, Gladstone Capital Corporation (NASDAQ:GLAD) operates under a special set of rules that shape how it’s structured and how it rewards investors. The management team draws on years of experience and a solid network across industries to find promising deals while keeping risk in check. Much of its attention remains on protecting credit quality and staying anchored in secured lending. Maintaining its BDC status is also key as it brings certain tax perks and, just as important, keeps shareholder returns at the forefront of the firm’s priorities.
Gladstone Capital Corporation (NASDAQ:GLAD)’s history of offering supplemental dividends makes it an appealing option for income investors. On September 15, the company declared an additional dividend of $0.10 per share. Its monthly dividend comes in at $0.165 per share for a dividend yield of 9.27%, as of October 5.
9. BlackRock TCP Capital Corp. (NASDAQ:TCPC)
Number of Hedge Fund Holders: 5
BlackRock TCP Capital Corp. (NASDAQ:TCPC) focuses on providing financing to mid-sized businesses that have solid track records and steady cash flow. Most of its financing comes in the form of senior secured loans, which helps protect its capital while generating steady returns through interest and lending fees. From time to time, it also takes small equity positions when the right opportunity comes along.
BlackRock TCP Capital Corp. (NASDAQ:TCPC)’s dividend history is stable enough to provide consistent income to shareholders. The company has paid uninterrupted dividends for 52 quarters and has a current quarterly payout of $0.25 per share. In addition, the company also offers supplemental dividends at regular intervals. The stock supports a dividend yield of 16.53%, as of October 5.
Lately, BlackRock TCP Capital Corp. (NASDAQ:TCPC) has been focused on cleaning up its portfolio and keeping risk in check. That means reducing exposure to loans that aren’t performing well, tightening credit standards, and shoring up its capital structure. The firm’s advisor, Tennenbaum Capital Partners, which is part of BlackRock, brings years of experience and plays an active role in fine-tuning investments. For BlackRock TCP Capital, the priorities remain the same: keep credit quality high, manage risk carefully, and stay compliant as a Business Development Company to continue rewarding shareholders.
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