What does this Really Mean?

BDC = BUSINESS DEVELOPMENT COMPANY

Regular readers know that I seek dividend income, prefer dividend growth, focus on quality, think long-term for our investments, and am not afraid of REITs, BDCs, and trading options. Sometimes abbreviations can be intimidating. A BDC is a Business Development Company. This type of company is in the financial sector and is often a small cap investment. Some of my favorite BDCs include ARCC, CSWC, GAIN, MAIN, and TSLX. TSLX sometimes “surprises” me with not just one, not just two, but three dividend announcements at the same time. TSLX is the ticker symbol for Sixth Street Specialty Lending, Inc.

Quarterly, Supplemental, and Special Dividends

When you add up the three dividends, they total $0.98. However, they have different Ex-Dividend dates and pay dates. If you want all three, you want to own the shares by November 30. In other words, you need to buy today. However, if you wait until later, you would still get the quarterly dividend and the special dividend.

TSLX announced three separate dividends: Quarterly, Supplemental, and Special.
  1. Sixth Street Specialty Lending (NYSE:TSLX) declared a $0.41/share quarterly dividend, in line with previous. Forward yield 6.83% payable Jan. 14; for shareholders of record Dec. 15; ex-div Dec. 14.
  2. The company announced third quarter supplemental dividend of $0.07 per share to shareholders of record as of November 30, 2021, payable on December 31, 2021.
  3. The company also announced a special dividend of $0.50 per share to shareholders of record as of December 7, 2021, payable on December 20, 2021
You won’t see three dividends every quarter, so this is unusual.

What is TSLX’s Business?

Sixth Street Specialty Lending, Inc. is a BDC.

Sixth Street Specialty Lending, Inc. is a business development company. The fund provides senior secured loans, mezzanine debt, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 – $250 million. The transaction size is between $15 – $350 million.

TSLX is not for a faint-hearted investor. Know what you are buying. This is for income, not growth.

Diversification

It may be tempting to go all-in with TSLX. I recommend a less focused approach. Buy shares of 3-4 BDC’s that fit your income and investment risk profile. If you have questions, don’t be afraid to ask.

BDC Informational Link

Closed End Fund Advisors has a nice summary list of BDCs that you can sort by various columns. The list claims to include the “Business Development Company (BDC) Universe.” You can click on a ticker symbol to learn more about each BDC. In this list you will find many of our investments, including ARCC, CSWC, GAIN, MAIN, NEWT, OCSL, SAR, SUNS, and TSLX. As you can see, I have a lot of interest in BDC investments.

LINK: Closed End Fund Advisors

Full Disclosure

Cindie and I own 1,675 shares of TSLX as a long-term investment. We own 3,100 shares of MAIN. GAIN holdings total 4,721 shares and ARCC comes in with a total of 4,600 shares.