The Dividend Mailbox® Two Paths to Value: Short-Term Yield vs. Long-Term Growth in Distressed Markets
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While dividend growth remains the core of what we do, it’s not the only path to building an income stream. In times of market distress, opportunities emerge that are simply too compelling to ignore. When venturing into troubled waters, the key is to stay disciplined and unemotional. Volatility may test you, but the potential rewards can be worth it.
In this episode, Greg explores two distinct approaches to finding value from an income perspective. In the first half, he discusses business development corporations (BDCs), which often offer eye-catching yields north of 10%. Using Oaktree Specialty Lending Corp. ($OCSL) as a case study, he unpacks how BDCs are structured, where their income potential comes from, and why they carry above-average risk. More importantly, he shares why patience and preparation are key to capturing value when these high-yield opportunities go on sale.
In the second half, we shift gears back to a more traditional name for dividend growth investors. Greg introduces Sysco Corp. ($SYY), a 50-year dividend payer in the essential world of food distribution. Unlike the high-yield, high-volatility world of BDCs, Sysco represents steady, well-managed growth with consistent operations. Even though the stock appears to have been in a holding pattern over the past few years, it fits squarely into our 10-year framework.
In both cases, price discipline is essential.
Topics Covered:
01:46 – Introduction to BDCs (Business Development Corporations)
05:18 – Oaktree Specialty Lending Corp Case Study
14:57 – Knowing What You Own: Risk and Return in Distressed Markets
16:23 – When and How to Buy BDCs
19:22 – Total Return Recap from a Past Investment in Oaktree
24:37 – Transition to Traditional Dividend Growth: Enter Sysco Corp
28:17 – The 10-Year Model: Can Sysco Double?
30:08 – Margin & Capital Efficiency Strengths
32:52 – Comparison to Competitors
35:05 – Valuation and Price-to-Sales History
35:29 – Risks: Cyclicality & Debt Load
38:58 – Why a “Boring” Food Distributor Might Outperform
41:39 – Wrapping Up: Patience, Price, and Knowing What You Own
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Notes & Resources:
DCM Investment Reports & Models
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