Is Barings BDC (BBDC) The Best Low Priced Dividend Stock to Buy Now?

In the ever-evolving landscape of finance, investors are constantly on the hunt for the next big dividend stock that offers both stability and growth. One name that has been making waves in this space is Barings BDC, Inc. (BBDC). With a dividend yield of 11.06% as of March 2025, BBDC stands out as a compelling option for income-focused investors. But is it the best low-priced dividend stock to buy now? Let's dive in and find out.



The Dividend Appeal

Barings BDC's dividend yield of 11.06% is significantly higher than the sector average of 1.381% for the finance sector. This high yield makes BBDC an attractive option for investors seeking income from their investments. The company's dividend payout ratio is 86.96%, which indicates that the company's earnings can support the current dividend payment amount. This payout ratio is sustainable, as it is below 100%, and the company has a history of paying dividends. BBDC has paid a dividend within the past 12 months, and the next ex-dividend date is Sep 03, 2025. The company's dividend is paid every three months, and the next dividend payment date is Sep 10, 2025.

Financial Metrics: The Good and the Bad

1. Earnings per Share (EPS): Barings BDC's EPS for the full year 2024 was $1.04. This is a significant figure as it indicates the company's profitability and its ability to generate earnings for its shareholders. The EPS has been relatively stable over the years, which is a positive sign for investors looking for consistent earnings growth.

2. Payout Ratio: The forward payout ratio for Barings BDC is 95.56%. This means that the company is paying out nearly all of its earnings as dividends. While this is attractive for income-focused investors, it also indicates that there is little room for dividend growth or reinvestment in the business. A high payout ratio can be a challenge if the company faces earnings volatility or needs to reinvest in growth opportunities.

3. Debt-to-Equity Ratio: As of December 31, 2024, Barings BDC's debt-to-equity ratio was 1.23x. This ratio indicates the company's leverage and its ability to meet its debt obligations. A debt-to-equity ratio of 1.23x is relatively high, which could be a concern for investors, especially in an economic downturn. However, the company's net debt-to-equity ratio (adjusted for unrestricted cash and net unsettled transactions) was 1.16x, which is slightly lower and indicates a better liquidity position.

4. Dividend Yield: Barings BDC has a forward dividend yield of 10.41%, which is significantly higher than the sector average of 1.381%. This high yield makes it an attractive option for income-focused investors, especially those looking for low-priced dividend stocks.

5. Dividend Growth: Barings BDC has increased its dividends for 2 consecutive years. This consistent dividend growth is a positive sign for investors looking for stable and growing income.

6. Net Investment Income: Barings BDC reported net investment income of $131.2 million, or $1.24 per share, for the full year 2024. This indicates that the company is generating consistent income from its investment portfolio, which supports its ability to pay dividends.

7. Net Asset Value (NAV) per Share: As of December 31, 2024, Barings BDC's NAV per share was $11.29. This is slightly lower than the previous quarter but still indicates a strong underlying value for the company's shares.

The Investment Case

Barings BDC's high dividend yield and consistent earnings make it an attractive option for low-priced dividend stocks. The company's stable EPS and consistent dividend growth are positive signs for investors. However, its high payout ratio and debt-to-equity ratio present challenges. Investors should carefully consider these factors and their risk tolerance before investing in Barings BDC.



Conclusion

In conclusion, while Barings BDC's high dividend yield and consistent earnings make it an attractive option for low-priced dividend stocks, its high payout ratio and debt-to-equity ratio present challenges. Investors should carefully consider these factors and their risk tolerance before investing in Barings BDC. With a dividend yield of 11.06% and a stable EPS, BBDC is certainly worth considering for income-focused investors. However, the high payout ratio and debt-to-equity ratio are red flags that investors should keep in mind. As always, do your own research and consult with a financial advisor before making any investment decisions.