In the current environment of historically low interest rates, there may be only one thing that’s better than an investment that pays robust quarterly dividends: one that pays monthly dividends.
Gladstone Investment Corporation GAIN 0.93%, Capitala Finance Corp CPTA 0.41% and Fidus Investment Corp FDUS 0.13% are three business development companies (BDCs) that pay monthly dividends, and all three yield at least 10 percent annually.
BDCs are a certain class of companies that invest in smaller businesses and are legally required to distribute at least 90 percent of their profits to shareholders. That means that many of these companies, like the three mentioned above, generate huge yields for investors.
So far in 2016, Capitala, Fidus and Gladstone shares are up 21.6, 16.5 and 6.6 percent, respectively. However, when distributions are factored in, those gains jump to 32.8, 22.7 and 13.9 percent.
If these types of gains and dividends seem too good to be true, there are a couple of caveats. First, a large part of your BDC distributions may be classified as income or non-qualified dividends for tax purposes. Those portions of your distributions will be taxed…
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