The Downside of 10% Dividend Yields

What's not to love about business development companies like American Capital Ltd. (NASDAQ: ACAS  ) ?

They're required by law to pay out all of their income. Dividend yields frequently top an eye-popping 10% per year, as has been the case at Apollo Investment Corporation (NASDAQ: AINV  ) . And many, including rockstars like Ares Capital Corporation (NASDAQ: ARCC  ) , have trounced the market since their IPO. 

What could go wrong?

In the following video, Motley Fool Bureau Chief David Hanson and Fool contributor Jordan Wathen discuss some inherent weaknesses in the BDC model, which are best exemplified in some of the longest-living BDCs on the market today.

Dividend stocks with growth potential
A proper dividend portfolio can reward investors not just with income, but stock appreciation. That's why high-yielding dividend stocks have crushed their non-dividend paying peers in total returns throughout history. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

  


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Related Tickers

7/30/2014 4:00 PM
ACAS $15.51 Up +0.04 +0.26%
American Capital,… CAPS Rating: ****
AINV $8.74 Down -0.03 -0.34%
Apollo Investment… CAPS Rating: *****
ARCC $16.97 Down -0.06 -0.35%
Ares Capital Corp CAPS Rating: ****

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