Main Street Capital Corporation Offers 6.2% Yield (MAIN)
By: Ned Piplovic,
Main Street Capital Corporation (MAIN) has only failed to boost its annual dividend once since it started its dividend distributions in 2007 and it currently offers a 6.2% yield.
The company’s share price had a strong uptrend going for the first half of the trailing 12 months but gave back all the gains and currently is trading below the price level from one year ago. However, the company’s robust dividend income might be enticing enough for some investors to view the current share price decline as a buying opportunity. Over the past two years, the share price rose 20%.
Investors who see this price dip as a buying opportunity and are convinced that the share price might return to its growing trend may want to take a position prior to the company’s next ex-dividend date on April 19, 2018, to guarantee eligibility for the company’s next round of dividend distributions on the May 25, 2018, pay date.
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 entered the current 12-month period riding a year-long uptrend. Between the $37.85 share price on March 29, 2017, and its 52-week high of $41.55 on November 8, 2017, the share price ascended almost 10%. However, after rising for nearly two years with minimal volatility and gaining 35%, the share price reversed its trend and declined 8.6% from the November 2017 peak and closed at $37.96 on January 31, 2018. The share price dropped another 5.6% in just one week at the beginning of February 2018. Through the remainder of February, the share price experienced some moderate volatility and reached its 52-week low of $37.41 on March 1, 2018. After its March 1, 2018 low, the share price gained 4.2% above its 52-week low and closed on April 2, 2018, at $36.76. this closing price was 11.5% short of the November 2017 peak price and 2.9% below the price from 12 months earlier.
While the share price faced some headwinds over the past few months, the company’s dividend continues to have smooth sailing. The current monthly dividend payout of $0.19 is 2.7% higher than the $0.185 distribution from the same period last year. Paid monthly, the current annualized total dividend of $2.28 yields 6.2%. This current yield is almost 65% higher than the 3.76% average yield of the entire Financials sector and 9.3% higher than the 5.66% simple average yield of all the companies in the Diversified Investments market segment.
Main Street Capital has been paying dividends since 2007 and has failed to hike its annual dividend only in 2010. That year, the company paid the same $1.50 annual dividend as it did in 2009. Since missing the dividend hike in 2010, the company rewarded its investors with eight consecutive years of rising dividend payouts. Over that period, the company’s annual distribution amount rose 73% by growing at an average rate of 7.1% per year.
In addition to rising regular dividends, Main Street Capital rewarded its shareholders with two special dividend payouts each year between 2013 and 2017. The total special dividend distributions ranged between 43% and 25% of the total annual regular dividend amount. The average special dividend payout over the five years was 29% of the regular annual dividend amount.
Even though its share price has fallen below its level from one year earlier, the company’s rising regular dividends and additional special dividend payouts kept the shareholders in the green with a 6.1% total return over the past 12 months. Over longer horizons of three and five years, the company provided its investors with total returns of 48% and 57%, respectively.
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