Business development companies (BDCs) were literally designed with dividends in mind. These 10 BDCs to buy yield up to 10.9%.

Business development companies provide firms with debt and equity capital, or a combination of the two, to help them grow. Many of the largest BDCs available to investors today provide equity and debt financing to middle-market companies, a considerable number of which operate industrial businesses with stable cash flows.

They first came to be in 1980 when Congress passed an amendment to the Investment Act of 1940 that created a new category of closed-end investment company: BDCs.

For tax purposes, BDCs must pay out 90% or more of their taxable income in the form of dividends so they can retain the tax benefits of regulated investment companies. BDCs may raise their dividends in boom times, however it’s not uncommon for some to cut their payouts depending on the business environment.

BDCs have become popular with retail investors over the past decade because of the significant income they generate. These companies often yield more than 8% on their distributions.

One thing to pay attention to when evaluating BDCs is costs. Externally managed BDC pay advisory fee and typically pay a low double digit percentage of returns or profits to the fund advisory manager. Internally managed BDC do not pay advisory fees. It does, however, incur the operating expenses of employing investment professionals to do investment analysis, research and other duties.

— Read on www.kiplinger.com/slideshow/investing/T018-S001-10-bdcs-to-buy-for-big-time-income/index.html