The 5 Best BDC Stocks to Buy for High Income
BDC stocks are a high-yielding way to gain exposure to private credit. With risks swirling, it pays to be selective and these BDCs are a good place to start.
Cause for alarm? Buying opportunity? It might be a little of both in the world of business development companies (BDCs).
We're seeing some turmoil in private credit, including rising redemptions amid questions about valuations after a period of rapid growth. It's now a massive $3 trillion market, where nonbank lenders make loans to midsize companies a little too big to borrow from banks but a little too small to access the public bond market. Investors are wondering what might be lurking on BDC balance sheets.
JPMorgan Chase (JPM) CEO Jamie Dimon sounded the alarm on private credit in late 2025 and said he saw "a couple of people doing some dumb things" in private credit markets, earlier this year, citing opaque pricing, aggressive leveraging and looser covenants as specific concerns. What it brings to mind, said Dimon, are memories of the 2008 financial crisis.
Since then, private credit funds run by Blue Owl, BlackRock, Morgan Stanley, Ares Management and Apollo Global Management have had to limit redemptions due to a lack of liquidity and panicked investors rushing for the doors. Blue Owl's publicly traded vehicle hit new all-time lows as investors sold first and asked questions later.
Is this something we should be worried about? Probably not, so long as we are selective. But BDCs are, at their core, a publicly traded window into the private credit market.
In other words, there are potential pitfalls investors want to avoid.
What exactly are BDCs?
You can think of a BDC as a publicly traded private credit or private equity fund with a few unique quirks. In a private fund, your money might be tied up for years as the manager controls when and how you cash out. But BDCs trade the same way stocks do, so you can buy or sell them in any brokerage account or IRA.
Here's where it gets juicy: BDCs pay no taxes at the corporate level so long as they distribute at least 90% of their taxable income as dividends every year. Every dollar that would have been paid in taxes is another dollar available to pay out to shareholders. The result is dividend yields that routinely hit double digits.
It should come as no surprise that BDCs are popular with income investors. They offer yields that are almost impossible to find elsewhere, at least in anything close to a similar risk profile.
It pays to be selective. Not all BDCs are equal. Some are more disciplined, while others are less so. Additionally, some have a strong track record of maintaining or raising their dividends, while others have a history of overpromising, which can lead to lowered payouts.
Some have high exposure to software companies and other businesses at risk of disruption from artificial intelligence (AI), while others are more diversified.
What should investors watch out for?
A few red flags stand out. First, heavy exposure to software and software-as-a-service (SaaS) companies is a potential risk. This is the sector in which private credit stress has been most acute, as AI-driven competition erodes the moats that once made these businesses reliable borrowers.
Second, beware of low loan quality. BDCs with significant second-lien, unsecured or subordinated debt in their portfolios face steeper losses when borrowers default because they're the last in line to be repaid.
Finally, watch out for high non-accrual rates, or loans on which borrowers have stopped making payments. This is an obvious sign of portfolio deterioration and a leading indicator of future dividend cuts.
The BDCs that hold up best in this environment share a common profile: portfolios dominated by first-lien senior secured loans, diversification across sectors, minimal exposure to the software industry, dividend coverage comfortably above 100% and management teams with a demonstrated track record of disciplined underwriting rather than fee-driven asset growth.
With all that in mind, let's look at five BDC stocks best positioned to weather short-term storms while continuing to deliver solid dividends.
Main Street Capital
- Market value: $5.5 billion
- Dividend yield: 5.4% (base); 7.9% total including supplementals
If BDC stocks are the proverbial Main Street meets Wall Street, then it's only fitting to start with Main Street Capital (MAIN).
Main Street provides debt and equity financing to middle-market companies with annual revenue from $10 million to $150 million.
Main Street is generally considered to be one of the best-managed BDCs in the space and a true blue-chip operator. Substantially its entire portfolio is invested in first-lien debt, and software makes up only 4% of its portfolio. What's more, it's a monthly dividend stock.
Business development companies are required to pay at least 90% of their earnings as dividends. But BDC earnings can be cyclical. Whenever earnings take even a short-term hit, many BDCs are put in the unfortunate position of having to choose between funding the dividend with debt or cutting it.
Main Street avoids that problem by keeping its regular dividend fairly modest and topping it off with special dividends, usually twice per year. In particularly good years, the "bonus" special dividends might be a little fatter than usual, and in bad years, they might get trimmed back.
In July, the company raised its regular monthly dividend to 26.5 cents per share, a 4% increase from the same period a year earlier. It also paid a supplemental dividend of 30 cents per share in June, with another to follow in September. All told, the combined regular and supplemental distributions deliver an annualized yield of approximately 7.9% based on MAIN's recent share price.
Cumulative dividends since Main Street's 2007 initial public offering (IPO) now total more than $50 per share — not bad on a stock that originally listed at $15.
That long-term compounding track record is rare in the BDC space, and it's a key reason MAIN continues to command a premium to net asset value even as most of its peers now trade at discounts.
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Blackstone Secured Lending Fund
- Market value: $5.8 billion
- Dividend yield: 12.3%
If you want the safest possible portfolio construction in the BDC space, Blackstone Secured Lending Fund (BXSL) makes a strong claim to the title. Nearly 98% of its portfolio is invested in first-lien, senior secured debt, meaning it sits at the very front of the repayment queue if a borrower runs into trouble. That figure is virtually unmatched among large BDCs.
The credit quality numbers back up the structure. BXSL's non-accrual rate on debt investments — the share of loans on which borrowers have stopped making payments — was 1.8% as of Q2 2026, one of the lowest in the sector. Average loan-to-value across the portfolio stood at 51.9%, meaning borrowers would have to lose roughly half their enterprise value before BXSL takes a loss on principal. Its dividend coverage ratio was slightly below 100%.
There is an elephant in the room worth addressing. The quarterly dividend has held steady at 77 cents per share for several years, and as market yields have eased, that coverage cushion has compressed.
Some analysts expect a modest trim this year, perhaps 10%, as floating-rate income drifts lower. However, it's important to distinguish between a dividend cut based on poor operating performance and a dividend cut resulting from volatile interest rates. One spells trouble, while the other is just a reality of current yields.
In any event, the market appears to have priced in the possibility of a cut. BXSL is trading at a discount to its net asset value of $25.53 per share, yielding more than 12% in the process.
The Blackstone parentage is itself a differentiator. BXSL benefits from Blackstone Credit's proprietary deal flow, deep relationships and institutional-quality risk management that smaller BDCs simply cannot replicate. For investors who want maximum protection in a stressed private credit environment, BXSL is difficult to beat.
BXSL does have relatively high exposure to software, at about 20% of the portfolio. But the vast majority of this software exposure is in security and systems software that AI is far less likely to disrupt.
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Kayne Anderson BDC
- Market value: $911.1 million
- Dividend yield: 11.6%
Kayne Anderson BDC (KBDC) is the smallest name on this list by market cap and arguably the most underappreciated. While most of the BDC sector has been scrambling to address software exposure, coverage gaps and rising non-accruals, KBDC has been quietly delivering on all three fronts. On the company's second-quarter earnings call, management reiterated that it expects to maintain the quarterly dividend of 40 cents per share through 2026.
The numbers support that confidence. Net interest income (NII) — a measure of the difference between interest earned on loans and interest paid on debt — was 42 cents per share in Q2, up from 40 cents per share a year ago, as KBDC continues to post NII growth in a difficult operating environment.
Dividend coverage was 105%. Non-accrual investments were 2.7% of the portfolio. Software exposure remains minimal. Management has explicitly called it out as the lowest in the BDC space — and is the intentional result of a disciplined sector-avoidance strategy going back years.
The portfolio itself is textbook conservative. About 93% of investments are first-lien senior secured loans, with 95.3% of debt investments in floating-rate instruments. Average borrower leverage is 4.5 times, and average loan-to-enterprise value is 43%, signaling a substantial equity cushion beneath KBDC's loans.
For retail investors, KBDC offers an unusual combination: Among the best credit metrics in the sector, explicit full-year dividend guidance and an attractive valuation.
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Ares Capital
- Market value: $14.5 billion
- Dividend yield: 9.5%
It's hard to compile a list of the best BDCs to buy without including Ares Capital (ARCC). At $14.5 billion, it's the world's largest BDC by market cap and considered by many to be one of the bluest of blue chips in the sector.
There are some risks here. While fully 60% of the portfolio is invested in first-lien, senior-secured debt, the portfolio has significant exposure to second-lien debt and equity.
That's not a deal breaker by itself, and Ares has a long history of managing risk and preserving capital. This is a BDC that has survived the 2008 financial crisis, the COVID-19 pandemic and every other calamity of the past two decades. But it's something to keep in mind when assessing safety.
Ares also has high exposure to software, with about 22% of its portfolio allocated to software companies. Again, that's not a dealbreaker by itself. As disruptive as AI is, it's still by no means certain that it will decimate the software industry. But again, it's something to keep in mind.
Ares Capital recently declared a dividend of 48 cents per share for an annualized payout of $1.92 per share. The company has raised its regular quarterly dividend by more than 20% since 2021 and has historically supplemented payouts with special dividends when earnings allow.
Its current 9.5% yield is solid for a BDC of ARCC's pedigree. it's quality is also reflected in the fact that it's trading at a slight premium to its NAV.
All in all, ARCC's size, scale and long history of underwriting discipline more than offset a slightly higher-than-ideal allocation to software companies and non-first-lien investments.
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Trinity Capital
- Market value: $1.7 billion
- Dividend yield: 11.1%
Trinity Capital (TRIN) occupies a distinctive niche in the BDC universe. While most BDCs focus purely on middle-market direct lending, Trinity blends secured loans with equipment financings and equity co-investments.
It's a diversified mix that gives the company multiple income streams and meaningful insulation from the stress in the software industry that has rattled Wall Street.
The credit metrics tell a reassuring story. Non-accrual loans stood at just 0.8% of the debt portfolio at the end of Q2, among the lowest in the sector. Net asset value grew 32.9% year over year to $1.3 billion, or $13.47 per share. Total gross investment commitments in the second quarter alone were $709 million, showing that Trinity continues to find attractive deals even in a tough industry environment.
After the company transitioned from quarterly to monthly dividend payments in January, the dividend picture is one of the cleaner ones in the BDC sector. Monthly dividend stocks are prized by income investors for the smoothness of their cash flows. Trinity is now paying 17 cents per share every month. and coverage is still above 100%.
With $430.1 million in available liquidity and a debt-to-equity ratio of 118%, leverage is within a comfortable range. The combination of a unique lending model, low non-accruals, rising NAV and a monthly dividend makes Trinity one of the more compelling income stories in the BDC space.
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