Investors looking for ways to find stocks that are set to beat quarterly earnings estimates should check out the Zacks Earnings ESP.

Ultra-high-yield strategies (e.g., CLO equity, aggressive call option funds) risk capital destruction and income instability. Yet, conservative blue-chip income portfolios often yield too little (3-4%) to meet robust income goals or outpace inflation. My approach is to strike a balance between these two worlds.

Regulated Investment Companies or RICs (BDCs, REITs, and CEFs), avoid corporate-level taxes by distributing at least 90% of taxable income as dividends. Trading above NAV (Net Asset Value) allows companies to issue new shares and invest the proceeds at a profit, growing the "pie" for everyone. Credit Quality Resilience: Despite a soft economy, top-tier BDCs are maintaining non-accrual rates well below 2%, outperforming traditional banks.

The BDC sector faces mounting risks: falling base rates, spread compression, and rising credit issues, driving a ~23% index drawdown in 12 months. Dividend cuts have accelerated, with 12 out of ~55 BDCs—including GBDC and GLAD—reducing payouts in the past year. Sector-wide average base dividend coverage sits at 100%, with fully leveraged balance sheets and no margin of safety.

Capital Southwest offers a secure, double-digit dividend yield, underpinned by positive momentum with originations and a 103% coverage of the base dividend. CSWC's dividend safety rests on robust origination momentum, low non-accrual rates, and a premium to NAV, supporting ongoing portfolio expansion. With 95% floating-rate loans, CSWC faces modest NII sensitivity to Fed cuts, but minimal software exposure shields it from AI-driven credit fears.

Three income powerhouses are trading at very compelling valuations right now. Each offers attractive income with substantial upside potential. Here's why I'm overweighting them while the market is still giving them away at a discount.

The market has become worried about BDCs mostly from the credit risk perspective. However, some of the recent earnings reports and BDC examples show that dividend cut risk has not disappeared. In this article, I share two BDC examples that are very likely to slash their dividends soon.

Business Development Companies (BDCs) face headwinds from declining interest rates, which pressure yields and dividend coverage across the sector. Lower rates reduce BDC income as loan yields fall, increasing the risk of dividend cuts—recently seen with GBDC and CION. I favor avoiding most BDCs in 2026, except for high-quality names like CSWC and ARCC, which offer relative resilience due to premium valuations and scale.

The yield that looks safe today may be your biggest long-term risk. Dividend cuts can be more damaging than market pullbacks. A better income strategy most retirees overlook.

Capital Southwest: The One BDC I'd Bet My Dividend On