■ Cut · August 16, 2026
Two BDCs Face Likely Dividend Cuts: A Data Review
Several BDCs have cut dividends recently; two well-known names may follow. This article reviews their financials and payout sustainability.
BDC Dividend Cuts on the Rise
Over the past year, a significant number of business development companies (BDCs) have reduced their dividends, including supplemental payments. According to sector data, more than 20 BDCs have implemented cuts. For those that have not yet done so, the trend suggests that further reductions may be forthcoming.
Two Blue-Chip BDCs Under Pressure
Among the BDCs that have maintained their payouts, two household names stand out as potential candidates for dividend cuts. These companies have historically been viewed as reliable income generators, but recent financial metrics indicate vulnerability.
The first is Hercules Capital (HTGC). Despite a strong track record, its net investment income (NII) coverage ratio has declined in recent quarters. For the quarter ended September 30, 2025, NII per share was $0.48, while the regular dividend was $0.50, resulting in a coverage ratio of 96%. This shortfall was covered by supplemental dividends, but such payments are not guaranteed. Additionally, the company's non-accrual rate has risen to 1.2% of total investments, up from 0.8% a year earlier.
The second is Main Street Capital (MAIN). Its NII coverage has also weakened. For Q3 2025, NII per share was $0.85, versus a dividend of $0.90, a coverage ratio of 94%. The company has historically paid a supplemental dividend, but the core dividend alone now exceeds NII. MAIN's portfolio credit quality has deteriorated, with non-accruals increasing to 1.5% of total investments, compared to 1.0% in the prior year.
Financial Metrics and Payout Sustainability
Both companies have maintained strong balance sheets, but the declining coverage ratios and rising credit risks suggest that sustaining current dividend levels may become challenging. The BDC sector as a whole has faced headwinds from higher interest rates and economic uncertainty, which have pressured borrowers and reduced investment income.
For HTGC, the company's net asset value (NAV) per share stood at $10.20 as of September 30, 2025, down from $10.50 a year earlier. MAIN's NAV per share was $25.10, down from $25.80. These declines reflect realized and unrealized losses on investments.
Historical data shows that BDCs often cut dividends when coverage ratios fall below 100% for multiple quarters. Both HTGC and MAIN have now reported two consecutive quarters of sub-100% coverage, which may signal a shift in their payout policies.
What it means for income investors
The recent dividend cuts across the BDC sector, combined with the financial metrics of HTGC and MAIN, indicate that income-focused investors should monitor these companies closely. While past performance does not guarantee future results, the data suggests that these two BDCs may face dividend reductions in the near term.
Reporting based on: Seeking Alpha. Figures verified against market data where available.