Main Street Capital Corporation Offers 2.6% Dividend Boost (MAIN)

The Main Street Capital Corporation (MAIN) rewarded its shareholders with a 2.6% dividend boost and currently offers a 6.4% dividend yield.

In addition to its eighth consecutive annual dividend boost, the company also hiked its annual dividend payout 10 times since initiating dividend distributions 11 years ago. The company’s dividend boost is effective as of the October 15, 2018, pay date. While new investors are too late to take advantage of that distribution, another opportunity is forthcoming. Because, the Main Street Capital Corporation distributes its dividends monthly, the company’s next ex-dividend date will occur on October 18, 2018 – just three days after the upcoming pay date. Investors can take advantage of the dividend boost by taking a long position before the upcoming ex-dividend pay date and ensuring eligibility for the next month’s dividend distribution, which will occur on November 15, 2018.

While the company managed to maintain a steady dividend boost streak, the share price experienced two significant corrections over the trailing 12 months. Each of those corrections exceeded 10% and resulted in a one-year capital loss of 7.8% by the end of trading on October 10, 2018. However, the company’s regular dividend distributions and two special dividends, compensated for the share price decline and managed to keep the total return over the past 12 months in the positive territory.

MAIN’s quarterly earnings per share (EPS) figures have outperformed the analysts’ expectations in each of the past four quarters. A similar result on the next earnings report – scheduled for November 2, 2018 – could send the share price higher. Investors with higher risk tolerances might consider the current price downturn as an opportunity to establish a long position or expand their existing position in anticipation of a that the share price might embark on another long-term rising trend. While waiting to see whether the share price will return to a sustained uptrend, investors might be content with collecting the outsized dividend income payouts. Furthermore, unless facing unexpected financial difficulties, the company should continue to offer at least one dividend boost per year and potentially additional special dividend distribution, which will provide shareholders with extra cash flow.

Main Street Capital Corporation (NYSE:MAIN)

Based in Houston, Texas, and founded in 1997, Main Street Capital Corporation is a business development company that specializes in long-term equity and debt investments. The firm invests in subordinated loans, private equity, venture debt, mezzanine investments, management buyouts, change of control transactions, ownership transitions, recapitalizations, strategic acquisitions, refinancing and business expansion capital. Additionally, the company invests in consumer staples, energy, health care, industrials, information technology, materials, telecommunication services and utilities sectors. Main Street Capital seeks to invest in traditional or basic businesses and avoids investing in start-up companies or companies with speculative business plans. While the company considers all domestic investment opportunities, most of the company’s investment allocation is in public companies based in the southern, south central and southwestern regions of the United States.

The company’s share price gained more than 50% during a two-year period that started in January 2016. As part of that uptrend, the share price gained more than 4% before reaching its new all-time high of $41.55 on November 8, 2017. However, the share price reversed direction immediately and cropped nearly 15% before reaching its 52-week low of $35.41 on March 1, 2018. After another direction reversal, the share price regained 85% of those losses but could not hold on to those gains and dropped again to close on October 10. 2018 at $36.80. While that closing price was almost 8% lower than 12 months earlier, it was 4% above the March low and nearly 22% higher than it was five years ago.

The current $0.195 monthly dividend payout is 2.6% above the $0.19 payout from the same period last year. Main Capital’s $2.34 annualized payout yields 6.4%. This current yield is almost double the 3.2% average yield of the entire Financials sector and more than 37% above the 4.63% simple average yield of all the companies in the Diversified Investments market segment. Main Street Capital failed to provide an annual dividend boost only once since 2007. Since the missed dividend boost in 2010, the company maintained a 5.7% average annual growth rate and enhanced its total annual dividend 56%.

While the current share price declined from its level on year ago, the combined total return over the past 12 months was still positive at 1.7%. However, without the shareprice volatility to offset dividend distributions, the total return over the past three years exceeded 60% and the total return over the past five years was nearly 72%.

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