Western Asset Investment Grade Income Fund (NYSE:PAI) & Golub Capital BDC (NASDAQ:GBDC) Critical Review

Western Asset Investment Grade Income Fund (NYSE:PAI) and Golub Capital BDC (NASDAQ:GBDC) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, earnings, institutional ownership, analyst recommendations, profitability, dividends and risk.

Insider and Institutional Ownership

19.0% of Western Asset Investment Grade Income Fund shares are owned by institutional investors. Comparatively, 42.4% of Golub Capital BDC shares are owned by institutional investors. 1.0% of Western Asset Investment Grade Income Fund shares are owned by company insiders. Comparatively, 1.4% of Golub Capital BDC shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk & Volatility

Western Asset Investment Grade Income Fund has a beta of 0.48, indicating that its share price is 52% less volatile than the S&P 500. Comparatively, Golub Capital BDC has a beta of 0.39, indicating that its share price is 61% less volatile than the S&P 500.

Dividends

Western Asset Investment Grade Income Fund pays an annual dividend of $0.63 per share and has a dividend yield of 5.3%. Golub Capital BDC pays an annual dividend of $1.32 per share and has a dividend yield of 10.1%. Golub Capital BDC pays out 203.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current recommendations and price targets for Western Asset Investment Grade Income Fund and Golub Capital BDC, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Western Asset Investment Grade Income Fund	0	0	0	0	0.00
Golub Capital BDC	0	2	4	1	2.86

Golub Capital BDC has a consensus target price of $13.90, suggesting a potential upside of 6.88%. Given Golub Capital BDC’s stronger consensus rating and higher possible upside, analysts clearly believe Golub Capital BDC is more favorable than Western Asset Investment Grade Income Fund.

Valuation and Earnings

This table compares Western Asset Investment Grade Income Fund and Golub Capital BDC”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Western Asset Investment Grade Income Fund	N/A	N/A	N/A	N/A	N/A
Golub Capital BDC	$870.78 million	3.88	$376.65 million	$0.65	20.01

Golub Capital BDC has higher revenue and earnings than Western Asset Investment Grade Income Fund.

Profitability

This table compares Western Asset Investment Grade Income Fund and Golub Capital BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Western Asset Investment Grade Income Fund	N/A	N/A	N/A
Golub Capital BDC	21.45%	9.91%	4.39%

Summary

Golub Capital BDC beats Western Asset Investment Grade Income Fund on 11 of the 13 factors compared between the two stocks.

About Western Asset Investment Grade Income Fund

Western Asset Income Fund is a closed-ended fixed income mutual fund launched and managed by Western Asset Management Company. It is co-managed by Western Asset Management Company Limited. The fund invests in the fixed income markets of the United States. It primarily invests in investment grade debt, including government securities, bank debt, commercial paper, and cash or cash equivalents. The fund benchmarks the performance of its portfolio against the Barclays U.S. Corporate High Yield Index and the Barclays U.S. Credit Index. Western Asset Income Fund was formed on March 22, 1973 and is domiciled in the United States.

About Golub Capital BDC

Golub Capital BDC, Inc. (GBDC) is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. It typically invests in diversified consumer services, automobiles, healthcare technology, insurance, health care equipment and supplies, hotels, restaurants and leisure, healthcare providers and services, IT services and specialty retails. It seeks to invest in the United States. It primarily invests in first lien traditional senior debt, first lien one stop, junior debt and equity, senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.