I wrote my last article on VanEck Vectors BDC Income ETF (BIZD) on July 10th. Since then, BIZD reached my target price of $12.27, and I began making preparations to liquidate my position. As I normally do, I updated my model, and while I was updating that model, I discovered that the managers at VanEck made some changes to BIZD’s portfolio. My projections for BIZD increased due to this change, changes in portfolio weights, and a decrease in BDC risks.
Table 1 – Alpha From BIZD Investment
|BIZD r%||RFR %||S&P r%||BETA||ALPHA|
Source: Public Data
As seen in Table 1, those who invested in BIZD in late April, when I made my first bullish call on the ETF, would have received an alpha of 7.5% from their investment. Both the BIZD and S&P 500 returns take into consideration dividends received during the analysis period.
Third-Quarter Dividend Distribution
BIZD announced on October 1st that it would distribute a dividend of $0.3603 to its shareholders. BIZD’s 3Q20 dividend was 6.3% less than its 2Q20 dividend and 1.9% less than its 3Q19 dividend.
Table 2 – 2019 and 2020 Dividends
|1Q Dividends||$0.4100||$0.3562||– 13.1%|
|2Q Dividends||$0.3861||$0.3847||– 0.4%|
|3Q Dividends||$0.3671||$0.3603||– 1.9%|
|4Q Dividends||$0.3664||$0.3622*||– 1.1%|
Source: Seeking Alpha and analyst’s estimates (*)
What I find most interesting about the information in Table 2 is that the 1Q20 dividend is the main reason why BIZD’s yearly dividend distributions decreased by 4.3% (includes my estimated 4Q20 dividend). The 1Q20 dividend was declared on 04/01/2020, a couple of weeks after the stock market had declined due to the expectations that the novel coronavirus would harm the economy. Though I can’t prove it with the data