Why I Am Buying Blue Owl Capital At 1-Year Highs

Core Viewpoint - Blue Owl Capital (NYSE:OBDC) is experiencing strong demand from dividend investors, with shares reaching new 1-year highs, supported by a reliable performance history and a solid dividend yield of 9% [1][4][18] Company Overview - Blue Owl Capital is the second-largest Business Development Company (BDC) in the market, with a market capitalization of $6.5 billion and a focus on first lien investments, which constitute 73% of its $12.4 billion investment portfolio [5][6] - The company primarily originates new investments in the first lien segment, accounting for 92% of new investments in Q1'24, while joint ventures and common equity represent smaller shares [6] Financial Performance - In Q1'24, Blue Owl Capital reported a net investment income per share of $0.47, with total distributions declared per share amounting to $0.42 [10] - The distribution coverage ratio for Q1'24 was 1.12X, indicating strong support for the dividend from net investment income [9] - The non-accrual percentage increased to 1.8% in Q1'24, with five portfolio companies classified as non-accrual, compared to four in the previous quarter [8] Investment Strategy - The company maintains a focus on highly collateralized debt investments, with a senior secured lending percentage of 81% [5] - Blue Owl Capital's investment strategy has led to a strong growth in total investment income, allowing for the payment of non-regular dividends [12] Market Position - Shares of Blue Owl Capital currently trade at a 1.07X price-to-net asset value (P/NAV) ratio, above its long-term average of 0.93X, reflecting investor confidence in its dividend continuity and balance sheet quality [12][11] - The company is positioned to benefit from potential Federal Reserve policy changes, particularly due to its high percentage of variable rate loans (97% as of Q1'24) [16][17]