The article asks whether income investors should favor business development companies (BDCs) over Realty Income, a large REIT. Realty Income offers a 5.8% forward yield, but over 10 years its stock fell 7% and its total return with reinvested dividends was 49%, versus 325% for the S&P 500, largely because it keeps issuing shares (share count up 264% over the decade) and is sensitive to rising rates. BDCs lend to middle-market companies at floating rates pegged to Fed benchmarks, so net interest income can rise with rates; the largest, Ares Capital, has a $29.3 billion portfolio and a 10.3% forward yield. The author nonetheless argues BDCs will likely struggle to beat the S&P 500 over the long run, since they distribute most of their earnings and also keep issuing shares, making them better suited to income-focused investors than to long-term compounding.
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