A lot happened with BDCs in 2016. American Capital (ACAS) and Ares Capital (ARCC -0.20%) merged to create the single-largest BDC by a mile, about one-quarter of BDCs slashed their dividends (with only a few increasing their dividends), and shareholders showed their frustration by voting against managers at annual meetings. Of those that experienced shareholder backlash, Goldman Sachs BDC (GSBD 0.40%) may have taken it the best.

In this edition of Industry Focus: Financials, join The Motley Fool's Gaby Lapera and contributor Jordan Wathen as they discuss some of Jordan's predictions for the BDC industry, and some general BDC trends in 2016.

A full transcript follows the video.

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Gaby Lapera: You said that "Not one BDC will liquidate."

Jordan Wathen: That didn't happen. There's a small one that's in the process of it, I don't think it'll happen.

Lapera: Ah, but it didn't happen until 2017, so you were right about 2016! (laughs) 

Wathen: I'll give credit to American Capital, which sold out to Ares Capital this year. There was more cash involved in that deal than stock, but it didn't completely liquidate, so.

Lapera: Yeah. "Dividend cuts will continue," which did happen.

Wathen: Yeah, I think 25% of the industry cut their dividends last year.

Lapera: Which is very responsible of them. Good for BDCs. It's kind of like when you have a juvenile delinquent and they go to school every day for a semester and you're like, "Good job! Awesome for doing what you should have done!" (laughs) That's how I feel about BDCs. "New focus by investors" -- investors are going to focus more on BDCs' net income than net investment income, which holds the BDC more accountable to actually meet performance metrics.

Wathen: Right. It's more about underwriting quality. Anybody can generate interest income. It's whether or not you can keep it and not lose it to bad loans. I don't know if we can quantify that, so I'm going to say yes/no/maybe/I don't know if that prediction was true.

Lapera: Yeah. "Individual investors play a bigger role in governance." It looks like individual stockholders are voting more on BDC proxies this year, which is good.

Wathen: Yeah, it was awesome. In one case -- I'm just going to give one case here -- Goldman Sachs' BDC asked their shareholders for the right to issue stock below book value. And their shareholders voted no. And Goldman Sachs, to its credit, didn't fight it, they didn't push off the annual meeting or anything. They said, "OK, fine, we won't do it, we don't need to do it," and life went on. A lot of BDCs would have suspended the annual meeting, pushed back the time, and then basically gone to people and wring their necks over and go, "No, vote for this, it's terrible for your interest but do it." So I'll give them a lot of credit for that, and I'll give credit to their shareholder base for saying no.