On Monday, RBC (TSX:RY) Capital Markets updated its outlook on Kayne Anderson BDC (NYSE:KBDC), raising the price target to $18 from the previous $17 while maintaining an Outperform rating on the stock. The adjustment comes after a review of the company's third-quarter performance and its strategic moves.
The analyst from RBC Capital cited the company's ongoing efforts to scale its portfolio and reach its targeted leverage as a positive sign. The focus on core middle-market (MM) direct lending, particularly in stable or slow-growing markets, was highlighted as a prudent approach. The advisory firm's value-lending philosophy was also commended.
Kayne Anderson BDC's dividend yield, which is approximately 10 to 11 percent, was noted as attractive, with the potential for special dividends in 2025. The firm's analysis suggests that investors could see a total return of around 18 percent over the next year, largely driven by the dividend yield.
The analyst's statement emphasized the company's strategic positioning, "We are fine-tuning our estimates post 3Q; KBDC continues to ramp up its portfolio to target leverage and core MM segment opportunities still seem attractive according to mgmt.
We favor KBDC's focus on core MM direct lending in stable/slow growing markets; the advisor's value-lending philosophy; and the attractive dividend yield (~10–11%) with potential for special dividends in 2025. Our estimates imply a total return of ~18% over the next year, mainly driven by dividend yield. Maintain Outperform rating and revising our PT to $18 (from $17)."
InvestingPro Insights
Recent data from InvestingPro aligns with RBC Capital Markets' positive outlook on Kayne Anderson BDC (NYSE:KBDC). The company's current dividend yield stands at an impressive 9.62%, supporting the analyst's view of an attractive yield in the 10-11% range. This high yield is particularly noteworthy given that KBDC is trading near its 52-week high, with its price at 98.99% of the peak.
InvestingPro Tips highlight that KBDC "pays a significant dividend to shareholders" and "generally trades with low price volatility," which may appeal to income-focused investors seeking stability. These characteristics align well with the company's focus on core middle-market direct lending in stable markets, as noted in the analyst's report.
It's worth noting that InvestingPro offers 5 additional tips for KBDC, providing investors with a more comprehensive analysis of the company's financial health and market position. For those interested in delving deeper into Kayne Anderson BDC's investment potential, exploring these additional insights could prove valuable in making informed decisions.
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