Blue Owl Capital Corp.: Can It Maintain Its Super-High Yield?

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Blue Owl Capital Corp. (NYSE: OBDC) is the business development company (BDC) subsidiary of Blue Owl Capital Inc. (NYSE: OWL).

The BDC has $12.9 billion in assets under management and currently yields 9.8%.

When it comes to the dividend, is management as wise as the bird in the company’s name? Let’s find out.

BDCs lend money to businesses that can’t get financing from a bank. Just as banks do, Safety Net looks at net interest income as an indicator of cash flow.

The majority (69%) of Blue Owl Capital Corp.’s portfolio is made up of first lien senior secured loans. “First lien” means the company is at the front of the line to get paid, and “senior secured” means the loans are backed by collateral.

Additionally, 98% of its loans are floating rate, which means the rates on the loans fluctuate over time as other rates change across the country.

That explains why rising interest rates are typically good for lenders, especially when the economy is solid. They help lenders generate more revenue and net interest income.

Case in point, Blue Owl Capital Corp.’s net interest income is expected to soar 68% from $895 million to $1.5 billion this year. In fact, it has been rising for several years.

Chart: Net Interest Income Expected to Make Massive Leap

The company’s most recent quarterly dividend was $0.33 per share. That makes its annual yield an impressive 9.8%.

This year, Blue Owl Capital Corp. is expected to pay out $575 million in dividends, which equates to a payout ratio of just 38%. That’s down from last year’s figure, a still very comfortable 55%.

The company has paid a dividend since 2019 and has never cut it. So its track record doesn’t contain any red flags… but it is quite brief.

With that in mind, you can’t make any assumptions about the dividend.

But when you consider Blue Owl Capital Corp.’s low payout ratio and booming net interest income, you can. Its dividend is safe.

Dividend Safety Rating: A

Dividend Grade Guide

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