The Business Development Company (BDC) sector has recently experienced a significant downturn, with prices falling 7-9% in a month due to market speculation about rapid interest rate cuts negatively impacting earnings and Net Asset Value (NAV). Despite this sector-wide pressure, the author initiated a position in Blackstone Secured Lending Fund (BXSL), citing its current compelling valuation at a 0.95 price-to-trailing NAV, significantly below its historical average of 1.06-1.07. This investment is supported by BXSL's strong track record of NAV protection, having increased NAV per share by approximately 5% since early 2022, and a belief that the market has overshot the recent decline, even with a potential dividend reduction anticipated in 2026.
We’re going to cover a bunch of high-yield stocks in our charts. We usually spend more time discussing mortgage REITs or preferred shares, but I am doing back-to-back articles focusing on the BDCs. We’re going to highlight several of them that are included in the VanEck BDC Income ETF (NYSEARCA:BIZD). The top 3 holdings, and most of the top 10, are going to be featured in our charts near the bottom. These BDCs have been sliding pretty fast over the last month (see right side of the 1-year chart): Most dividends haven’t been cut yet, but we should expect some dividends to be trimmed due to the sharp reduction in short-term interest rates. The BDCs typically own floating-rate loans, so their net interest income will generally trend lower over the next year if the Federal Reserve reduces rates a couple more times (as the bond market is forecasting). Now, you might’ve heard me mention the same theme in my prior article. However, that’s where the similarities end. I’m switching gears to talk about a recent purchase. Dividends BIZD and my recent pick both yield right about 12% using their trailing dividend rate. A Recent Purchase I recently initiated a position in Blackstone Secured Lending Fund (BXSL). It’s been getting thoroughly smashed lately. The Decline in Blackstone Secured Lending Fund The sharp decline in the share price was enough to make shares much more attractive to me. Those valuations took a pretty big hit. Before we simply assume that lower price automatically means a bargain, we should take a look at whether BXSL has been able to protect their NAV historically. If management couldn’t protect the NAV, then that would be a huge warning sign. If you have SA Premium, you can look up the financials for a company on Seeking Alpha. For instance, the historical financial statements for BXSL are available here. You can find them for any stock. Just search the ticker, then hit “financials” and pick the income statement, balance sheet, or cash flow. Using that data along with a price history, we were able to create the following two charts: Note: While we are technically in October, the Q3 2025 book values have not been announced. Consequently, this chart still uses the NAV from the end of June for the current calculations. The REIT Forum has our own estimates for NAV, but the swing is not massive. Nice Upside Shares have a substantial discount to the valuation they enjoyed as recently as July 2025. Do I expect BXSL to promptly set new highs? No. Not in this market. But the average price-to-trailing NAV for BXSL since the IPO was about 1.06 to 1.07. That's still materially higher than the 0.95 today. If BXSL recovers to its prior average price-to-NAV ratio, the upside would be equal to about a year of dividends. Since early 2024, BXSL has spent the vast majority of days trading above 1.10 price-to-NAV. So, based on recent history, the average price-to-NAV would be even higher. The "since IPO" average was pulled down by a period in late 2022 to early 2023 when price-to-trailing NAV was in the .87 to .95 range. Well, we're already down to the top of that range. Protecting NAV We can tell that BXSL did an outstanding job of protecting their NAV. The NAV actually moved slightly higher over that time. The NAV per share increased around 5% since early 2022. We calculate NAV on a per-share basis because that’s the most useful value for our analysis. If total NAV increased but NAV per share was trending lower, that would still be bad. But seeing NAV trending higher should give us more confidence. Of course, we also dig deeper into the portfolio. That’s beyond the scope of this article, though. Because they protected their NAV so effectively, the chart might seem less relevant. After all, the NAV was relatively constant. But for companies where NAV is swinging severely, you would see the valuation range correlating strongly with NAV. Not Alone Scott Kennedy, the man who provides the mortgage REIT and BDC research for our REIT Forum service, shared a note with our subscribers recently: “I increased my position in BXSL at a weighted average purchase price of $25.89 per share. As previously noted, I'm patiently building a position in this stock (not "a race" per se to build a position all at once). Again, I'm layering into my position as market sentiment towards the BDC sector, as a whole, has recently soured. The BDC sector has recently been "beaten up" over speculation regarding a more rapid interest rate cutting cycle and more bearish/negative projected future economic performance. If such a scenario were to play out, this would negatively impact BDC sector earnings and NAV performance. That said, I continue to not be as bearish as some market participants/recent implied sentiment. I continue to project more of a “soft economic landing”. As such, BXSL’s valuation is becoming more and more compelling as the price drops which matches nicely to my/our valuation methodology. That's why I started with a small position and have been building up larger "blocks" as it has decreased. To remain unbiased, there will likely eventually be a dividend reduction in 2026 (even with the very large cumulative UTI balance). However, the recent quick drop in stock price from $32+ all the way down to the high $25’s is, in my opinion, the market coming to this reality. Even with a future dividend reduction, BXSL provides very good - great long-term value and I believe the market has "overshot" this recent decline in stock price.” The Sector If you look at any BDC index, you’ll see prices got hammered lately. Adjusted for dividends, shares dropped around 7% to 9% in under a month: That’s a material change, as BDCs are usually not that volatile. For the year, values were down around 4% to 7% for the sector: If you’re interested in BDCs, there are more opportunities today than there were at most points this year. Some look materially better than others to me. I’ll include the charts for comparison across the sector below. You’ll notice the price-to-trailing NAV factors are widely varied across the sector. The BDCs are sorted by risk rating (our internal metric). The lower-risk companies are closer to the top. However, we can only be so granular in our ratings. There are many ties. When there is a tie, the sorting is arbitrary. So you can tell right away that FSK (last in the chart) is going to be higher risk than MAIN (first in the chart), but two BDCs that are kind of near each other may actually have the same risk rating. Analysis Strategy We’re constantly working on providing new updated estimates for BV (book value) and NAV (Net Asset Value) in The REIT Forum. However, many investors fail to even compare the trailing values. In this series, we calculate the price-to-trailing BV or NAV for many mortgage REITs and BDCs, as well as providing several metrics on baby bonds and preferred shares. Charts for those things are available near the end of the article. We emphasize price-to-BV and price-to-NAV because those metrics provide insight into valuations. All The Stocks The charts compare the following companies and their preferred shares or baby bonds: - BDCs: (CSWC), (BXSL), (TSLX), (OCSL), (GAIN), (TPVG), (FSK), (MAIN), (ARCC), (GBDC), (OBDC), (SLRC) - Commercial mREITs: (GPMT), (FBRT), (BXMT) - Residential Hybrid mREITs: (MITT), (CIM), (RC), (MFA), (EFC), (ADAM) - Residential Agency mREITs: (NLY), (AGNC), (CHMI), (DX), (TWO), (ARR), (ORC) - Residential Originator and Servicer mREITs: (RITM), (PMT) Note: NYMT recently changed their ticker to ADAM. The new ticker is included in our charts. The baby bonds and preferred shares also changed tickers with NYMT being replaced by ADAM within each ticker. For instance, NYMTZ became ADAMZ. Embedded Charts Mortgage REITs and BDCs: Note: The chart says Q1 2025 BVs, but it's actually Q2 2025 BV which is the latest reported figure. Future charts have the titles fixed. Uploading new images within a table leads to bugs. Preferred shares and baby bonds: Thanks for reading, and I hope you enjoyed the charts. Some terminology: - FTF = Fixed-to-floating. Share is currently fixed but will begin floating based on SOFR. We may reference LIBOR, but that's assumed to be SOFR + 0.26161%. - FTR = Fixed-to-reset. Share is currently fixed. It will eventually begin resetting every 5 years based on the 5-year Treasury rate. - FTL = Fixed-to-lawsuit. The company decided that their FTF shares could be "fixed-to-fixed" despite clearly violating the original intent of the contract. - Floating = A share that was FTF, but is now floating. The dividend rate is updated every 3 months. The Business Development Company (BDC) sector has recently experienced a significant downturn, with prices for BDC indices, including holdings within the VanEck BDC Income ETF (BIZD), declining 7-9% in under a month and 4-7% year-to-date. This broad market pressure stems from speculation regarding accelerated Federal Reserve interest rate cuts, which would reduce BDCs' net interest income due to their floating-rate loan portfolios. Consequently, while most dividends remain intact, future trimming is anticipated across the sector. Despite these sector-wide concerns, Blackstone Secured Lending Fund (BXSL) presents a compelling valuation, currently trading at a 0.95 price-to-trailing NAV. This is notably below its historical average of 1.06-1.07 since IPO and its recent trading above 1.10. A key differentiating factor for BXSL is its "outstanding" track record of NAV protection, evidenced by a 5% increase in NAV per share since early 2022, providing confidence amid potential industry volatility. The sharp decline in BXSL's share price, attributed to market "overshoot" on rate cut expectations, has prompted accumulation by analysts, including a recent position initiation. While a dividend reduction for BXSL is projected for 2026, the current valuation is considered attractive. This sentiment reflects a belief in a "soft economic landing" scenario, contrasting with more bearish market participants.
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