Main Street Capital Stock (NYSE:MAIN): This Monthly Dividend Stock Now Yields 5.8%
1 Top Monthly Dividend Stock for Income Investors
In today’s stock market, very few companies pay monthly dividends. And because investors are willing to pay a premium for more frequent distributions, the price of the most well-known monthly dividend stocks have already been bid up.
Dividend yield moves inversely to a company’s share price. So does that mean investors looking for monthly dividends have to settle for a low yield?
Not necessarily. For instance, Main Street Capital Corporation (NYSE:MAIN) is a solid monthly dividend stock that’s currently yielding 5.8%.
Main Street Capital is a business development company, or “BDC.” Headquartered in Houston, Texas, it focuses on providing long-term debt and equity capital to lower-middle-market companies. These businesses generally have revenue between $10.0 million and $150.0 million and earnings before interest, tax, depreciation and amortization (EBITDA) of between $3.0 million and $20.0 million.
As an investment firm, Main Street has more than $3.5 billion in investment capital under management. Its portfolio is well diversified across industry, geography, and transaction type.
By the end of March 2017, the company has investments in 191 companies. The largest individual portfolio company represents just 3.7% of Main Street’s total investment income and just 3.1% of total portfolio value. Having a diversified portfolio provides structural protection to the company revenue and income stream.
Total Portfolio by Industry (As a Percentage of Cost)
Source: “Investor Presentation,” Main Street Capital Corporation, June 6, 2017.
For a business development company, a common measure of performance is growth in net asset value (NAV). Since 2007, Main Street Capital’s NAV per share has increased 75%, translating to a compound annual growth rate of 6.2%.
One of the reasons why Main Street can deliver strong NAV-per-share growth was its ability to invest in lower-middle-market equity. Because most BDCs focus on debt alone, they could not deliver this kind of NAV-per-share growth through business cycles.
Delivering Strong Total Returns
One of the things that draws investors to this monthly dividend stock is its handsome dividend yield. Very often, a company’s high yield comes from subdued share price. However, that’s not really the case for Main Street.
Main Street Capital completed its initial public offering (IPO) in 2007, which was not exactly the best times for our economy. But over the years, the company has delivered strong shareholder return through its generous dividends and share price appreciation.
Source: “Summary Fact Sheet,” Main Street Capital Corporation, last accessed June 6, 2017.
As the chart above shows, since Main Street’s IPO, it has consistently outperformed its peer group and a number of stock market indices.
Here’s the best part: this monthly dividend stock has been raising its payout. Main Street started with quarterly dividends and switched to monthly payments in September 2008. Since the company’s IPO, its per-share monthly payout has increased 68%. (Source: “Dividends,” Main Street Capital Corporation, last accessed June 6, 2017.)
What’s more is that the company is paying special cash dividends on top of its regular dividends. Usually, special dividends are nonrecurring, but Main Street began paying periodic supplemental dividends in January 2013 and moved to semi-annual special dividends in July 2013. The company recently declared a $0.275-per-share supplemental dividend to be paid later this month.
After including special dividends, this monthly dividend stock would be yielding 7.24% at today’s price.
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.