Net Investment Income (NII)
Abbreviation: NII
Plain-English definition
Net investment income is the investment income a BDC reports after subtracting operating expenses, including financing costs and management or administrative expenses. Realized and unrealized investment gains and losses are generally presented separately.
Why it matters
For a BDC that identifies NII as the earnings source of its dividend, NII shows how much reported operating earnings remain after the costs of running and financing the portfolio. The exact calculation and adjustments must be read in the company's filings.
Example
If a BDC reports $0.48 per share of NII for a quarter and pays a $0.45 regular dividend, NII exceeded that quarter's regular dividend by $0.03 per share. One quarter alone does not establish lasting support.
How income investors use it
Compare NII using consistent per-share units and reporting definitions. Review the income statement and footnotes for fee waivers, incentive-fee effects, noncash income, and changes in shares outstanding before drawing a conclusion.
Fly High perspective
Use NII in the Fly High coverage method only when the company identifies NII as the source of its dividend. Apply the same earnings definition across the two reported quarters and two independent consensus quarters used in the Four-Quarter Annualized Earnings Estimate.
This material is general education, not individualized investment, tax, or legal advice.