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Morgan Stanley Direct Lending: Undervalued BDC Offers High Dividend Yield Despite Stock Drop

MSDL's stock price has fallen, but its high dividend yield remains appealing. With a solid non-accruals ratio and potential for multiple appreciation, investors should take note.

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1 min read
This image is taken outdoors. At the bottom of the image there is a road. At the top right of the...
This image is taken outdoors. At the bottom of the image there is a road. At the top right of the image there is the sky. There is a tree and there is a pole with a few wires. In the middle of the image two men are standing on the road. In the background there are a few stalls with walls and pillars. There are few tents and there are many boards with text on them. There are many things in the stalls there are few cardboard boxes and wooden boxes. A bicycle is parked on the road.

Morgan Stanley Direct Lending: Undervalued BDC Offers High Dividend Yield Despite Stock Drop

Morgan Stanley Direct Lending (NYSE:MSDL) has witnessed its stock market today price plummet by approximately 20% year-to-date. Despite this, the company's income potential remains appealing, with a dividend yield of roughly 12% if the current $0.50 per share quarterly payment persists.

MSDL, a debt-focused business development company (BDC), has 99.6% of its loans structured as floating-rate. This has led to a decrease in net investment income, with Q2 2025 NII at $0.50 per share. However, the company's non-accruals ratio remains robust at 0.7% as of June 30, 2025.

MSDL's regular dividend coverage is at a concerning 100% level, with a quarterly dividend of $0.50 per share. Despite this, the company's income potential remains attractive. MSDL trades at a significantly lower multiple than its peer, Blackstone Secured Lending Fund (BXSL), at around 0.8x compared to BXSL's 1.0x. Analysts anticipate MSDL's stock market today price to increase by roughly 10% to narrow this valuation gap.

Morgan Stanley Direct Lending's stock market today price decline and dividend coverage concerns have sparked interest. Yet, its solid non-accruals ratio, attractive income potential, and potential for multiple appreciations and income generation make it an intriguing prospect. As MSDL's stock market today price is expected to rise, investors may want to keep a close eye on this debt-oriented BDC.

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