You Say That Like It’s a Bad Thing

Last week, I read an interesting opinion piece about my favorite BDC (business development company). It proclaimed: “Hercules Capital’s Growth Era is Over—Durability Remains.” I appreciated the addition after the dash because declaring a company’s growth era over is usually seen as the worst thing for investors.

It’s not wrong to think that way if you’re just looking for a higher share price. That upward movement happens when investors think a stock has the potential to be worth more. So, there must be a macroeconomic catalyst on the horizon or growth prospects for the company.

For us income investors, it’s not that cut and dry.

Our primary goal is an income stream we can use to supplement our lifestyle now or build wealth for the future. Share price gains are a nice bonus. And when they equal several years of our target income, you can view them as “fast-forwarding” your expected income.

This is a “debate” that I get drawn into quite often.  

Sideways Is Fine with Me

Last year, I was on a panel focused on income investing and we got asked about my favorite stock—Enterprise Products Partners (EPD). You all know I was ready to field this question, but another panel member answered first. He said it wasn’t his favorite way to collect income from oil because the share price doesn’t go anywhere.

I jumped in next to counter that a steady share price is one of the reasons I really like EPD. It’s the largest position in my personal portfolio and I’ve been a fan for over a decade. And, yes, the share price can be fairly steady for long periods.

Before the March 2020 market drop, shares had found a nice channel between $23.80 and $29.50. Since then, they have oscillated their way back above $30. I think they could settle into a post-COVID channel between $30 and $32.50.

If that price channel sticks, it would equal a yield of 6.7%-7.2%. My subscribers have a higher effective yield, but I’m okay with that range. I’ll continue to accumulate shares on dips that put the yield at 7%.

Oil will continue to be transported through the Permian and Delaware Basins and beyond. And EPD will continue to collect revenues on its volume-based contracts.

Hopefully, EPD’s dividend will keep inching higher every year. If not, I’m happy to collect my current yield.

“Flat” is not a dirty word to me when my goal is income. And it shouldn’t automatically be a dealbreaker for you either.

Another Personal Favorite

Hercules Capital (HTGC) is another stock I’ve followed for over a decade. During that time, it has basically traded between $10 and $22.

It seems to have found recent support around $17. I think shares could be headed into a nice sideways channel as well. It’s not a bad place to be, as shares between $17 and $20 will pay a whopping 9.4%-11% yield.

The “durability” is there because the majority of Hercules loans are floating with a floor. Even if we get further rate cuts from the Fed, HTGC’s loans have a minimum “floor” that prevents rates from dropping further. Many of its loans are at or close to that level already.

I actually think rate cuts are good for BDCs overall, and Hercules in particular.

When borrowing money gets more expensive (rates go up), companies will put non-critical expansion plans on pause. They will continue to reinvest, but will use greater caution.

When money gets cheaper (rates go down), companies will revisit projects put on the backburner. I actually think HTGC will see an uptick of originations for both new and existing borrowers in 2026. And I wouldn’t be surprised if some of the companies that have been prepaying their higher rate loans come back for new loans to take advantage of lower rates.

I remain bullish on HTGC into 2026. If the stock enters a period of flat share prices, I’m still here for it. Keep collecting your income. Don’t let the fear of stagnant share prices cause you to miss out on your next income opportunity.

For more income, now and in the future,

Kelly Green