Business development companies, or BDCs, can give investors exposure to businesses in a range of industries, and they also come with high cash flow. Their high yields are a major draw for investors seeking a stream of passive income, after the initial vetting is done, of course.
For example, in the simplest terms, if you put $10,000 into quality stocks that average a 4% yield for a year, you can earn $400 in passive income. Finding stocks that average a 5% yield can increase your annual earnings to $500. While the yield offers immediate cash flow, your passive income can grow each year with dividend hikes and reinvestment.
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BDCs come with high yields, but they also come with inherent risks that you should know before gaining exposure to this investment opportunity. Some also come with high fees, so most investors should be looking at total return numbers to gauge overall performance.
This guide will outline how business development companies work and list some of the top BDC stocks and exchange-traded funds, or ETFs, available to buy for income.
What Is a Business Development Company?
Business development companies invest in small and midsize businesses through equity stakes and loans. This business model offers built-in portfolio diversification for investors that also produces more cash flow than most S&P 500 stocks.
When BDCs lend money, they usually get to charge higher interest rates since their borrowers are riskier businesses. Federal regulations prevent most banks from working with the companies BDCs work with, giving them the exposure to higher-risk, higher-reward opportunities.
Just as index funds offer exposure to a wide range of stocks, BDCs are diversified across many companies. If a company that makes up a large portion of a BDC’s total revenue goes under, the BDC can face some turbulence.
Advantages and Risks of BDCs
The main benefit of BDCs is their high yields and diversification into several small and medium-sized businesses. Just as with real estate investment trusts, or REITs, BDCs must pay 90% of profits out to shareholders via dividends. That extra cash flow could help you cover more of your living expenses in retirement, instead of waiting for another stock’s dividend to catch up through years of dividend hikes.
However, BDCs get exposure to distressed businesses that most banks won’t do business with. There’s the risk that some companies could go under, which explains why diversification is necessary for BDCs.
The real yield also isn’t as high as you may expect. That’s because dividend distributions from BDCs are treated as ordinary income for retail investors. These payouts are taxed at higher rates than distributions from corporations like Apple Inc. (ticker: AAPL) and Verizon Communications Inc. (VZ), which offer qualified dividends that are taxed at long-term capital gains rates, assuming you hold your shares for more than one year.
Some BDCs generate respectable returns while paying out high dividends. However, those dividends also represent money that cannot be reinvested into the business. Even though companies like Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX) could comfortably offer dividends if they chose to, they avoid such payouts so they can plow more money back into their businesses.
With that in mind, here are some of the top BDC stocks and ETFs to buy with their trailing-12-month (TTM) yields:
| BDC Stock/ETF | TTM Yield |
| Blue Owl Capital Inc. (OWL) | 8.5% |
| Main Street Capital Corp. (MAIN) | 5.5%* |
| Ares Capital Corp. (ARCC) | 10.0% |
| Golub Capital BDC Inc. (GBDC) | 10.9% |
| VanEck BDC Income ETF (BIZD) | 13.1%** |
| Invesco Global Listed Private Equity ETF (PSP) | 6.4% |
| Global X Alternative Income ETF (ALTY) | 7.3% |
*Based on regular monthly dividends. At the current share price of $52, MAIN’s TTM yield is 8.2% including supplemental dividends.**BIZD has delivered a five-year annualized return of about 6%. Its expense ratio is 9.69%.
Blue Owl Capital Inc. (OWL)
Blue Owl Capital is an alternative asset manager that oversees $315 billion in total assets under management (AUM). Direct lending makes up more than one-third of total assets, but it also has exposure to real estate, digital infrastructure and other industries.
The firm is the manager of specialized businesses including Blue Owl Capital Corp. (OBDC), a separate BDC that holds the actual loans. It has attracted high-profile interest: President Donald Trump holds Blue Owl Capital Inc. as a top investment and maintains a stake of more than $5 million in its affiliate, OBDC.
OWL boosted its AUM by 15% year over year in Q1 2026. It has $1.3 billion in liquidity and a BBB+ credit rating from Fitch. Blue Owl currently offers an 8.5% trailing-12-month yield for investors, with rising revenue and profits.
“Our financial results reflect stability, stemming from our durable capital base, and growth, driven by fundraising and ongoing capital deployment. Performance remains strong across Credit, Real Assets and GP Strategic Capital,” Blue Owl CEOs Doug Ostrover and Marc Lipschultz said when announcing Q1 results.
Main Street Capital Corp. (MAIN)
Main Street Capital offers monthly dividend payouts that come to a 5.5% trailing annual yield, based on regular dividends alone (the company also pays supplemental dividends that put the yield in the range of 7.6% to 8.2%). The BDC stock has $8.8 billion in capital under management, with 189 companies in its portfolio.
Main Street deals in lower-middle-market and private credit, and helps with debt financing, acquisitions and management buyouts. This approach has designed Main Street to “provide sustainable, long-term growth in recurring monthly dividends, meaningful supplemental dividends and long-term appreciation to shareholders,” according to the firm’s Q4 2025 earnings presentation.
Main Street Capital prioritizes companies with $10 million to $150 million in annual revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA, ranging from $3 million to $20 million. The standards go up to $25 million to $500 million in annual revenue and EBITDA ranging between $7.5 million and $50 million for debt investments in privately held firms that are owned or being acquired by a private equity fund.
Ares Capital Corp. (ARCC)
Ares Capital prioritizes middle-market companies and comes with a 10% yield. The BDC’s investor relations site claims that it prioritizes companies with stable cash flow and experienced management teams. The firm reported 607 holdings that make up its $29.5 billion portfolio in Q1 2026, bolstering a strong financial foundation.
“During the first quarter, we maintained a strong and flexible balance sheet while further enhancing our capital structure, including raising over $1.25 billion of new debt financing at attractive terms,” Chief Financial Officer Scott Lem said in the company’s Q1 2026 press release.
Golub Capital BDC Inc. (GBDC)
Golub Capital BDC is a well-diversified firm with 420 portfolio companies spread across its $8.3 billion portfolio. The company’s March 2026 presentation cites a 9.5% internal rate of return since its 2010 IPO and a BBB Fitch rating.
The presentation also pegged the net asset value per share at $14.35, which is above the stock’s current market price of about $13 (a roughly 10% discount to NAV). Golub Capital BDC provides an attractive 10.9% yield for its shareholders.
VanEck BDC Income ETF (BIZD)
VanEck BDC Income ETF has delivered a 6% average annual return over the past five years. It gives investors exposure to various business development companies, including high-income BDCs. The fund’s trailing-12-month yield is 13.1%, but keep in mind that its expense ratio is 9.69%. This ETF specializes in private credit and lending to middle-market companies. It has $1.6 billion in total assets.
The fund’s top four holdings are Ares Capital, Blue Owl Capital Corp., Main Street Capital and Golub Capital BDC. Those four assets make up about 34% of the fund’s total portfolio.
Invesco Global Listed Private Equity ETF (PSP)
The Invesco Global Listed Private Equity ETF, which tracks the Red Rocks Global Listed Private Equity Index, holds securities that include American depositary receipts and global depositary receipts. These ADRs and GDRs comprise more than 60 holdings. PSP has a three-year annualized return of 13.3%, and it has a trailing-12-month yield of 6.4%.
PSP’s top 10 holdings make up nearly half of its total assets and include KKR & Co. Inc. (KKR), Blackstone Inc. (BX) and EQT Corp. (EQT), which represent 15% of the fund’s portfolio. This ETF’s yield may be lower than those of some other investments on this list, but its expense ratio is lower, too, at 1.8%.
Global X Alternative Income ETF (ALTY)
The Global X Alternative Income ETF holds various alternative investments that offer high income instead of focusing solely on BDCs. The fund invests in five distinct income segments: master limited partnerships and infrastructure, real estate, preferred stocks, emerging-market bonds, and covered calls.
ALTY’s top three holdings are other funds: Global X SuperDividend REIT ETF (SRET), Global X Nasdaq 100 Covered Call ETF (QYLD) and Global X U.S. Preferred ETF (PFFD).
These three investments represent about 60% of the fund’s assets. ALTY has a relatively low expense ratio of 0.5%, and the fund has returned an annualized 11.8% over the past three years. ALTY makes monthly payouts and has a trailing-12-month yield of 7.3%.
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7 Best BDC Stocks and ETFs to Buy for Income originally appeared on usnews.com
Update 05/12/26: This story was previously published at an earlier date and has been updated with new information.
