Invest Like A Billionaire With 8.6% Yield: TriplePoint Venture

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Have you ever wondered where “startups” or new businesses get the money to get rolling?

Most companies are not started by trust fund babies or millionaires looking for something new to do. Often before they have become millionaires or started trust funds, individuals who start new companies need to get cash from somewhere.

This is where venture capital plays a key role. Venture Capital Is The Backbone Of American Innovation

Venture capital is a form of financing used by young companies at different stages of their growth. These companies, especially those in the startup stage, have business models that aren’t fully proven and often haven’t achieved profitability, and find it challenging to access funding. VCs play a significant role here by making risky investments in these young companies in return for equity ownership. They diversify their investments, so the winners not just balance out the failures but end up becoming blue-chip companies on a global scale.

Over the years, venture capital investment has been responsible for delivering substantial productivity gains to the U.S. economy and powering global digital transformation. Leading economists describe venture capital as the DNA of the American capitalistic economy. In recent decades VC has generated more economic and employment growth in the U.S. than any other investment sector. Brookings.edu Some of the largest companies in the world – Apple ( AAPL ), Costco ( COST ), Tesla ( TSLA ) were all VC-backed at some point in their early stages. VC Investing Is Difficult, But The Income Method Makes It Easy

The highly-lucrative VC businesses are mostly out of reach for individual investors.

Venture capital in fast-growth companies is usually reserved to large funds (who have billions of assets under management), and super-rich individuals. Even if it were to become accessible through SPAC or other private equity exposure, they’re extremely risky, let alone be suitable to generate reliable income for retirees.

Companies that went public through SPAC mergers between January 2019 to June 2020 underperformed the Nasdaq composite by up to 64%. So if you’re investing in these to generate income periodically, you will have to sell more shares today than six months ago to generate the same income level. And the shares you own are finite, meaning you will eventually run out of shares to sell, making it a less sustainable method of generating income.

Enter TriplePoint Venture Growth ( TPVG ), a high-quality BDC (business development company) that focuses on venture growth stage business. As a BDC, they’re required to distribute 90% of their income to shareholders. TPVG gives the retail investor the opportunity to invest in venture capital which would otherwise not be available or offered on the stock markets. Let us now discuss how TPVG fits the requirements to be an excellent income investment.

TPVG is expected to report Q4-2021 earnings early in March 2022. Solid Track Record Of Putting Cash Into Investors’ Pockets

Have you ever heard of early-stage companies paying dividends? This makes TPVG a unique investment where you can participate in the hot markets while collecting cash today.

TPVG distributes $0.36/share every quarter, which calculates to an 8.6% annualized yield. The BDC has made four special distributions in its eight-year history, with the most recent one being a $0.10/share distribution in January 2021. TPVG has consistently earned in excess of its distributions and made no reductions to its distribution during the most uncertain periods of the pandemic. TPVG November 2021 Investor Presentation Now, looking at the chart above , you may be quick to the point that YTD Net Investment Income (‘NII’) isn’t covering the YTD distributions. Let us discuss this a bit more.

BDC income can be a bit lumpy, and income is often retained in the form of NAV growth. While this can make the dividend appear uncovered, the reality is far different under the covers. When TPVG earns over its distributions, the retained excess NII can fuel the distributions in years when the BDC chooses to retain unrealized capital gains. In fact, TPVG’s NAV (including the $0.10 special dividend) is up $0.58 from the December 31, 2019, pre-pandemic level and $1.70 since the start of the pandemic in Q1 2020. Growing NAV – this means the fund is healthy and the distributions are sustainable. TPVG November 2021 Investor Presentation TPVG’s 9% yield makes it an excellent income pick, no doubt. But are we paying the right price for it? Let’s find out. TPVG’s portfolio companies like Rent the Runway ( RENT ) and Enjoy ( ENJY ) […]

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