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Externally managed BDCs face structural challenges, notably high fees and misaligned incentives, making them difficult portfolio inclusions. I favor internally managed BDCs for long-term value, but selectively own some external names as well. There could be two motives for owning external ones: 1) tactical trades (high risk, high retur) and 2) long-term income compounding.

Double-digit dividend yields that are fully covered by underlying earnings and trade at huge discounts to NAV are often eye-catching and worth a closer look. I look at some compelling opportunities that also have strong or improving fundamentals and are either currently aggressively buying back stock or looking to do so soon. I also look at some of the issues facing these companies that explain why this opportunity…

Goldman Sachs BDC continues to exhibit below-average investment quality, with persistent portfolio shrinkage and elevated non-accruals. GSBD's Q2 dividend dropped 40% year-over-year, reflecting ongoing pressure from non-accrual loans and a contracting asset base. Despite a high 118.8% dividend coverage ratio in Q2'26, GSBD's non-accrual ratio remains the second-highest among peers, undermining investor confidence.

Goldman Sachs BDC remains a hold as portfolio growth and NAV continue to decline amid sector headwinds. GSBD's 14.1% dividend yield is well-covered by net investment income, with a 116% coverage rate and $0.89 per share in spillover income. New investment activity remains muted, with negative net funded investments and limited catalysts for near-term NAV or earnings growth.

Goldman Sachs BDC NYSE: GSBD reported second-quarter 2026 net investment income of $0.38 per share, up from the prior quarter, as higher investment income and the absence of an incentive fee supported results. The company also announced that Co-Chief Executive Officer David Miller will step down from the role effective Dec. 31, with Co-CEO Vivek Bantwal set to become sole CEO.