We live in a data-dependent world. We also live in a world vulnerable to cybercrime, which can cut our access to technologies we rely on every day. Dividend investors don’t have a lot of options with tech companies that defend us against cybercrime. So, one of my favorite strategies is to look at Business Development Companies, or BDCs, that invest in the space, like Hercules Capital Inc. (HTGC), writes Kelly Green, editor of Dividend Digest.
Consider the recent CDK Global attack. CDK software is used by nearly 15,000 car dealerships. It helps them manage vehicle acquisitions, sales, financing, insurance, repairs/maintenance, and even payroll.
(Editor’s Note: Kelly Green is speaking at the Income-Generating Strategies Virtual Expo, which runs July 23-24. Click HERE to register)
Last Wednesday, the company was hit with a cyberattack. CDK could be forced to pay millions of dollars in ransom to the hackers. I spoke with a friend who is a technician at one of the affected dealerships. They are handling repair and maintenance requests using carbon copy forms. I guess they were lucky and found a dusty box of them somewhere.
Hercules Capital Inc. (HTGC)
Other dealerships report filling out forms by hand to process sales. This includes sending “runners” to motor vehicle departments to complete registrations. The company says it will take days, not weeks, to fix the interruption. In the meantime, hundreds of thousands of employees and customers are dealing with the setback.
As the global datasphere continues its blistering growth, don’t expect a slowdown in malicious cyber assaults – or growth in the cybersecurity industry. It was valued at $181 billion in 2023 and projected to grow 10% annually through 2030. It’s an industry that has carved its niche in a data-dependent future.
That brings me to BDCs. These were created in 1980 as part of the Small Business Investment Act to attract additional capital for small and medium businesses. This is why BDCs must invest at least 70% of their assets in US companies with a market value below $250 million.
These are usually growth-stage business or those under financial stress. The BDCs not only provide financing, but also operational assistance. BDCs give us access to investments we might not be able to invest in otherwise. That’s because many of these companies are private or have very thinly traded public shares.
HTGC focuses primarily on the technology and life sciences spaces. This includes companies working in both the AI and cybersecurity sectors. At today’s stock price, you’re looking at a 9.6% yield. That is a great way to amplify your income stream.
Recommended Action: Buy HTGC
