Monthly Dividend Stocks: Main Street Capital Corporation (NYSE:MAIN)
By: Ned Piplovic,
As one of the most reliable monthly dividend stocks, the Main Street Capital Corporation (NYSE:MAIN) rewarded its shareholders with nearly a decade of annual dividend hikes and an above-average dividend yield.
In addition to its ninth consecutive annual dividend boost, the company also hiked its annual dividend payout in 11 out of 12 years since beginning dividend distributions in 2007. The company just boosted its monthly dividend distribution for the upcoming pay date in mid-July. New investors will not be able to take advantage of that payout boost because the ex-dividend date was on June 27, 2019, for the July distribution.
However, the advantage of monthly dividend stocks is that investors do not have to wait long for the next round of dividend payouts. The next ex-dividend date will occur on July 17, 2019 — just two days after the next pay date in mid-July — for the subsequent round of dividend distributions on August 15, 2019.
While Main Street Capital has maintained its steady dividend hikes, the share price has experienced some volatility during 2018. In addition to the stocks own fluctuation, the overall market correction at the end of 2018 pushed the Main Street Capital’s share price to levels not seen since mid-2016. However, dividend growth, a special dividend distribution in June, strong fundamentals and robust financial results, pushed the share price to recover fully and reach new highs by June 2019.
Main Street Capital delivered quarterly earnings per share (EPS) figures that have outperformed analysts’ expectations in three out of the last four quarters. The company’s most recent adjusted EPS of $0.64 outperformed the company’s own $0.63 result from one year earlier. Furthermore, the $0.64 EPS figure also beat analysts’ $0.62 expectation by 3.2%. This result came after a $0.69 EPS result in the previous quarter that beat analysts’ estimates by nearly 10%.
Main Street Capital Corporation (NYSE:MAIN)
Based in Houston 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 the utilities sector. 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 allocations has been in public companies based in the southern, south-central and southwestern regions of the United States.
Monthly Dividend Stocks: Main Street Capital Share Price
The company’s share price advanced more than 50% between the beginning of 2016 and the end of 2017. However, after reaching its new all-time high at the end of 2017, the share price declined more than 12% in the first two months of 2018. The share price reversed direction and regained most of those losses over the subsequent six months. Unfortunately, the downward pressure of the market correction in late 2018 cut short the recovery and pushed the share price more than 14% below the price level from the beginning of the trailing 12-month period.
However, after bottoming out at $32.58 on December 24, 2019, the share price embarked on a steep uptrend and recovered those losses by mid-February 2019. The share price continued rising, reached its previous peak from late-2017 by early June and rose to set a new all-time high of $41.80 on June 14, 2019. After peaking in mid-June, the share price pulled back 1.4% to close on June 25, 2019, at $41.08. This closing price was 8% higher than the price level from the beginning of the trailing 12-month period and 26% above the 52-week low from late-December.
Monthly Dividend Stocks: Main Street Capital Dividends
Main Street Capital increased its monthly payout for the July distribution 2.5% to $0.21 from $0.205 in the previous period. This was the company’s second dividend hike in the past 12 months. Compared to the $0.19 monthly payout amount from July last year, the current $0.21 distribution is nearly 8% higher. The current monthly distribution amount corresponds to an annualized total payout amount of $2.46. Since the share price grew faster than the dividend distributions, the current 6% forward dividend yield is slightly below the company’s own 7.05% yield average over the past five years.
However, while trailing its own five-year average, Main Street Capital’s current 6% yield is nearly double the 3.08% simple average yield of the entire Financial sector. Furthermore, Main Street Capital’s current yield is also nearly 14% higher than the 5.26% average yield of the company’s peers in the Diversified Investments industry segment, which includes many other monthly dividend stocks.
Main Street Capital has missed an annual dividend hike only once since introducing dividend distributions in 2007. However, after paying the same $1.50 annual dividend amount in 2010 as it did in 2009, the company has boosted its annual payout every year. Since missing a hike in 2010, the company has advanced its annual payout amount nearly 65%, which is equivalent to an average annual growth rate of 5.7% over the past nine years. Even with a flat payout in 2010, Main Street Capital managed to nearly double its annual dividend payout for a 5.3% average growth rate over the past dozen years.
With a robust dividend growth and a rising share price, the company rewarded its shareholders with a total return of more than 17% over the past year. Over the past three years, the dividend income accounted for more than half the 52% total returns. Additionally, the dividend income delivered more than two-thirds of the 73% total gains over the past five years.
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