Belden(US:BDC) Seeking Alpha·2024-09-14 11:00Market Action - BDCs experienced a decline of approximately 1% during the week, with lower valuation BDCs like MRCC, PSEC, and WHF outperforming [3] - The average valuation of BDCs in coverage ended the week at 103%, significantly below the recent peak of 110% [3] Systematic Income - Analyzing net investment income (NII) is crucial for income investors, particularly in understanding the distribution between common and preferred shareholders [4] - Preferred dividends are not considered interest expenses under GAAP, which can lead to overestimation of common dividend coverage by investors [4] - Only CGBD and PSEC have utilized preferreds, with CGBD's preferred converted to common shares at NAV [4] PSEC Analysis - PSEC's NII of $0.25 per share, with $0.06 allocated to preferred dividends, results in $0.19 for common shareholders, leading to a coverage ratio of approximately 105.5% [5] - PSEC reported that NII less preferred dividends exceeded cash common distributions by 124% for the last twelve months ending June 2024, although this may overstate the current situation due to rising preferred distributions [6] Market Commentary - Following the BDC earnings season, market activity has been dominated by routine events such as new portfolio investments and credit facility upsizes [7] - Main Street Capital invested $11.2 million in MoneyThumb, Trinity Capital committed $20 million to Kymeta, and PennantPark Investment Corp agreed to invest an additional $52.5 million in a joint venture [7] Stance And Takeaways - The average BDC valuation remains above 100%, with a median of 96%, indicating a slightly expensive market relative to fair value [8] - The company has added several BDCs to its Income Portfolios after the early August price drop but has since held off on further investments [8] - A potential drop in short-term rates is not expected to significantly impact BDC prices or dividends, suggesting that market panic could present new investment opportunities [8]