How BDC Dividends Are Covered (Net Investment Income)
Business development companies pay some of the market's highest regular yields, and the measure that tells you whether those payouts hold is net investment income (NII) — not earnings per share.
What NII is and why it governs
A BDC earns interest and fees on loans to private mid-sized companies. NII is that income minus operating and financing costs — the recurring cash engine of the business. Reported EPS, by contrast, swings with unrealized marks on the loan book, which makes the ordinary payout ratio close to meaningless for the sector.
Coverage of the distribution by NII per share is the standard test: sustained payment above NII is being funded from capital rather than income.
The risks behind the yield
Like REITs, BDCs must distribute at least 90% of taxable income, so high yield is structural. The offsetting risks are credit and leverage: NII depends on borrowers staying current, and most BDCs borrow to amplify returns. Rate cycles cut both ways — floating-rate loan books earn more as rates rise, while borrower stress rises with them.
Our BDC list shows every business development company in coverage; EPS-based figures on their pages carry an explicit caveat since we do not carry NII data.