The Best BDC Stocks to Watch and Invest in 2025

Business development companies (BDCs) give investors a way to earn high-yield income while gaining exposure to private debt markets. These firms provide financing to small and mid-sized businesses that struggle to secure traditional bank loans. Many BDC stocks offer consistent dividend payouts, making them attractive for those focused on income generation.

For traders, BDCs can be an opportunity to capitalize on price swings driven by interest rate changes, credit conditions, and market sentiment. Some of these stocks can see strong short-term momentum, especially when economic conditions favor lending growth.

While I prefer trading over long-term investing, I understand why some traders look at BDCs for passive income.

If you’re considering BDC stocks, it’s critical to weigh both potential returns and risks. Below is a list of some of the top BDC stocks and ETFs worth watching in 2025. As always, price action and catalysts matter more than just dividend yields.

Top BDC Stocks to Buy in 2025

Business development companies (BDCs) have been gaining attention as a high-yield investment option, but picking the right ones is key. Some trade at a steep premium, while others offer better value. As always, price action, valuation, and overall market conditions should guide your decision, not just dividend yields.

The following stocks and ETFs are among the most notable BDC investments in 2025. Whether you’re looking for steady income or potential upside, it’s important to analyze the risk and reward before making any decisions.

Before you send in your orders, take note: I have NO plans to trade these stocks unless they fit my preferred setups. This is only a watchlist.

The best traders watch more than they trade. That’s what I’m trying to model here. Pay attention to the work that goes in, not the picks that come out.

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1. Main Street Capital Corp. (NYSE: MAIN)

Main Street Capital has a reputation for stability and a strong dividend track record, but at current prices, traders need to be cautious. The stock has surged over 37% in the past year, pushing its valuation to nearly double its net asset value (NAV). Rising non-accruals—now at 1.4% of fair value—also suggest some deterioration in fundamentals.

The company reported $136.8 million in total investment income for Q3 2024, an 11% increase year-over-year. It has continued issuing supplemental dividends, with the latest payout at $0.30 per share. However, with a regular dividend yield of 4.9%, it now offers a lower return than some money market funds. While it remains a strong BDC, traders should question whether future upside is limited at these price levels.

2. VanEck BDC Income ETF (NYSEARCA: BIZD)

BIZD provides broad exposure to the BDC sector, holding top names like Ares Capital (ARCC), FS KKR Capital (FSK), and Blue Owl Capital (OBDC). With a dividend yield around 10%, it’s appealing for those seeking passive income. However, BIZD isn’t without risks—BDC valuations have been climbing, and economic uncertainty could impact lending conditions.

This ETF tracks the MVIS US Business Development Companies Index, ensuring diversified exposure. A tightening of investment spreads has been a headwind for many BDCs, but the fund’s diversified holdings help mitigate individual stock risks. If you’re looking for a way to gain exposure to BDCs while managing risk, BIZD could be worth considering.

3. Blue Owl Capital Inc. (NYSE: OWL)

Blue Owl Capital isn’t a traditional BDC, but it operates in the alternative asset management space with a focus on private credit. It has aggressively expanded, growing its assets under management (AUM) by 75% year-over-year in 2024. This has fueled strong fee-related earnings growth and consistent dividend increases.

With a P/E ratio of 25.7x and a price-to-sales multiple of 5.9x, OWL isn’t cheap. However, analysts project 19% annual revenue growth over the next three years, well above the industry average. While it’s not a short-term trading play, investors who believe in the continued expansion of private credit might see long-term value here.

4. Global X Alternative Income ETF (NASDAQ: ALTY)

ALTY is an ETF designed for income-focused investors looking beyond equities. It offers exposure to a range of alternative assets, including real estate, infrastructure, and high-yield bonds. With a 7.16% yield, it’s a potential option for those prioritizing income generation.

This ETF has been relatively stable compared to individual BDC stocks, but it still moves with broader market conditions. Traders looking for higher volatility might find better opportunities elsewhere, but for those seeking diversification, ALTY provides access to income-generating assets with lower single-stock risk.

5. FS KKR Capital Corp. (NYSE: FSK)

FS KKR Capital is one of the larger BDCs, with a focus on private middle-market lending. Unlike MAIN, FSK trades closer to its book value, making it more attractive from a valuation standpoint. It offers a dividend yield around 10%, significantly higher than some of its overvalued peers.

Analysts recently upgraded their price targets for FSK, with some seeing it as an undervalued income play. However, short interest has dropped significantly, indicating that traders may be covering bearish bets. For investors looking for a high-yield BDC with a more reasonable valuation, FSK is worth watching.

What Are Business Development Company (BDC) Stocks?

BDCs were created to help small and mid-sized businesses access capital while offering investors an opportunity to earn high yields. These companies operate similarly to private equity firms, investing in debt and sometimes taking equity stakes.

BDCs must distribute at least 90% of their taxable income as dividends, which is why their yields are often high. However, this structure also makes them vulnerable to economic downturns, as they have limited ability to retain earnings for growth.

From a trading perspective, BDCs can see price swings based on interest rate changes, credit market conditions, and earnings reports. Their volatility makes them tradable, but long-term investors need to be mindful of valuation risks.

Are BDCs a Good Investment in 2025?

BDCs have benefited from high interest rates, as many of their loans are floating-rate. However, as the Federal Reserve shifts policy, this advantage could diminish. Traders and investors alike need to stay aware of interest rate trends and credit market stability.

While some BDCs continue to trade at reasonable valuations, others, like MAIN, have seen their share prices run up significantly. This makes stock selection critical—just because a BDC pays a high dividend doesn’t mean it’s a good buy.

For those looking at BDCs for income, diversification through ETFs like BIZD might be a better option. But for traders, individual BDCs can present opportunities when volatility picks up.

BDC stocks offer high dividends, but they come with risk. Their performance depends on interest rates, market conditions, and the strength of the businesses they finance. Investors chasing yield should compare BDCs to other high-dividend plays before committing. Some dividend stocks outside the BDC space offer stability with solid payouts. Here’s a list of high-dividend stocks worth checking out.

How to Choose the Best BDC Dividend Stocks

Finding the right BDC stocks requires looking beyond just the dividend yield. High yields can sometimes be misleading if a company is overleveraged or facing declining net asset value.

One key metric to watch is the price-to-NAV ratio. If a BDC trades far above its net asset value, it might be overvalued. On the other hand, if it trades at a discount, it could signal an opportunity—if its loan portfolio is solid.

Another factor is credit quality. Rising non-accruals (loans in default) can be a red flag. BDCs that maintain strong loan underwriting standards are more likely to sustain their dividends over time.

Some BDC stocks trade on major exchanges, but many are on the OTC market. That means less liquidity and higher risk. If you’re looking at BDCs, it’s smart to understand how OTC stocks work and what to watch for. Here’s a guide to the best OTC stocks right now.

Strategies for Investing in BDC Stocks

For traders, BDCs can offer short-term opportunities when they react to earnings, interest rate changes, or market sentiment shifts. Stocks like MAIN, which trade at stretched valuations, can see sharp pullbacks, creating potential dip-buying setups.

Investors focused on dividends should consider spreading their bets across multiple BDCs or using ETFs like BIZD to reduce single-stock risk. While high-yield payouts are attractive, they don’t guarantee strong long-term performance.

Understanding market cycles is also important. When credit conditions tighten, BDCs can struggle. When lending is strong, they tend to perform better. Watching macroeconomic trends can help determine the best entry and exit points.

Key Takeaways

• BDCs offer high dividend yields, but some trade at inflated valuations.
• MAIN and FSK are two of the most notable BDCs, but they have very different valuations.
• Interest rates play a major role in BDC stock performance—rising rates have helped, but future policy shifts could impact returns.
• BDCs carry risk—economic downturns and credit defaults can hurt earnings and dividend stability.
• Traders can find opportunities in BDC price swings, but long-term investors need to focus on valuation and credit quality.

This is a market tailor-made for traders who are prepared. No stock is “safe” — the days of buying a stock for a life and holding it are gone. Stick to your plan, manage your risk, and don’t let FOMO drive your decisions.

These opportunities are fast and unpredictable, but with the right strategy, you can make them work for you.

I recommend that you pay close attention to the first days of this possibly historic bull market.

If you want to know what I’m looking for—check out my free webinar here!

Frequently Asked Questions

What Are the Risks of Investing in BDC Stocks?

BDCs face risks related to credit defaults, interest rate fluctuations, and economic downturns. If the companies they lend to struggle, non-accrual rates can rise, impacting earnings and dividends. Some BDCs also use leverage, which can amplify losses in tough market conditions.

Can BDC Stocks Provide Consistent Income for Retirement?

Many retirees look at BDCs for passive income due to their high dividend yields. However, dividend payouts aren’t guaranteed and can fluctuate based on economic conditions. Retirees relying on BDCs should diversify to manage risk.

How Does BDC Compare to REITs as an Investment?

Both BDCs and REITs are income-generating investments, but they focus on different asset classes. BDCs lend to businesses, while REITs own and manage real estate properties. BDCs tend to have higher volatility, while REITs can be more stable, depending on the sector.

What Should Investors Consider About Taxes When Investing in BDC Stocks?

Taxes can significantly impact your investment returns, especially with BDCs, which distribute most of their earnings to shareholders. Since these dividends are often taxed as ordinary income rather than at the lower rate for qualified dividends, investors should factor this into their investment strategy. Reviewing the latest tax news and using available resources—such as a tax professional or financial newsletter—can help optimize tax efficiency.

How Can Market News and Data Help When Trading BDC Stocks?

Staying updated on market news and company data is critical for making informed trading decisions in BDC stocks. Interest rate changes, regulatory updates, and sector-wide lending trends can all impact performance. Regularly reviewing investment analysis and adjusting your strategy accordingly can help you react to new opportunities or risks.

What Role Do Securities and Shares Play in BDC Investments?

BDCs operate by investing in private securities and loans, funding middle-market companies in exchange for interest payments and equity shares. The structure of these investments means that returns can fluctuate based on credit risk and economic conditions. Careful analysis of a BDC’s portfolio and underwriting standards can help investors gauge potential risks and rewards.

How Can Investors Use a Financial Newsletter for Better BDC Investing Decisions?

A reliable financial newsletter can provide actionable advice on BDC investments, including updates on dividend sustainability and sector-wide shifts. These insights often include detailed information on market trends, allowing investors to adjust their order timing and asset allocation. Combining this with independent research ensures a well-rounded approach to managing risk and maximizing returns.