Main Street Capital's Dividend Projection For June-August 2016

| About: Main Street (MAIN)

Summary

This article analyzes MAIN's near-term dividend sustainability by performing three tests based on historical and future quarterly results.

The first two tests will analyze MAIN's net ICTI and cumulative UTI which are based on IRC methodologies.

It is important for investors to understand the difference between MAIN's NII and net ICTI regarding reliable dividend sustainability metrics/projections.

The third test will focus on the probability of MAIN continuing to provide special periodic dividends in the future.

Summarized results from the three tests performed, including a projection for MAIN’s monthly dividend for June-August 2016, are stated within the "Conclusions Drawn" section of the article.

Author's Note: This article is a detailed look at Main Street Capital Corp.'s (NYSE:MAIN) "near-term" dividend sustainability. I have performed this analysis due to the growing number of readers who have specifically requested such an analysis be periodically performed on MAIN. For readers who just want the summarized conclusions/results, I would suggest to scroll down to the "Conclusions Drawn" section at the bottom of the article.

Focus of Article:

The focus of this article is to provide a detailed analysis with supporting documentation (via three tests) on the near-term dividend sustainability of MAIN. This analysis will be provided after a brief overview of MAIN's regulated investment company ("RIC") classification per the Internal Revenue Code ("IRC"). After a discussion of this topic, I will be performing three dividend sustainability tests. The first two tests will focus on MAIN's net investment company taxable income ("ICTI") and the company's undistributed taxable income ("UTI"). These two tests will be termed "TEST 1" and "TEST 2". The third test will focus on MAIN's "unrealized appreciation (depreciation) on investments" account and be termed "TEST 3". At the end of this article, there will be a conclusion based on the results obtained from TEST 1, TEST 2, and TEST 3 about the near-term dividend sustainability of MAIN. I will also provide my projection regarding MAIN's monthly dividend per share rate for June, July, and August 2016 and my reiterated projection regarding the company's next special periodic dividend likely to be declared in late April and paid in June 2016.

Understanding the tax and dividend payout characteristics of MAIN will provide investors with an overall better understanding of the business development company ("BDC") sector as a whole. From reading this article, investors will better understand how a RIC per the IRC comes up with the company's current dividend per share rate and specific signs when an impending increase or decrease should occur.

Brief Discussion of MAIN's RIC Classification per the IRC:

As a BDC, MAIN elects to be treated as a RIC under "Subchapter M" of the IRC. To continue to qualify annually as a RIC, the IRC requires MAIN to meet certain "source-of-income" and "asset diversification" requirements. These requirements are beyond the scope of this article and will not be mentioned again. There is one specific provision which pertains to MAIN's dividend sustainability that should be discussed. As a RIC, MAIN is required to distribute to shareholders at least 90% of the company's "ICTI" and "net capital gains" (in excess of its "capital loss carryforward" balance; if applicable) in any given tax year in order to be eligible for the tax benefits allowed in regards to this type of entity. If MAIN qualifies to be taxed as a RIC, the company avoids double taxation by being allowed to take a "dividends paid deduction" at the corporate level.

Several "book to tax" adjustments need to be determined to properly convert MAIN's "earnings per share" ("EPS") figure to the company's ICTI. Next, one would need to determine MAIN's net capital gains for the specified time period. Net capital gains consist of realized short-term net capital gains in excess of realized long-term net capital losses for each tax year. While most sector peers continue to have a material capital loss carryforward balance from prior years, MAIN currently is one of the rare BDC exceptions. In fact, MAIN has never had a capital loss carryforward balance dating all the way back to the company's initial public offering ("IPO"). This is an important (and positive) trend for readers to understand. When MAIN's ICTI and net capital gains are combined, this comprises the company's "net ICTI" which is also known as its "annual distribution requirement" ("ADR").

Regarding MAIN's ADR, the company has an additional option available if it fails to distribute 90% of its net ICTI within a given year. MAIN is allowed to carryover its net ICTI into the following year. However, MAIN must distribute the company's remaining net ICTI from the prior year through declared dividends prior to the filing of its tax return from the previous year. This is also known as the "spillback provision". If MAIN fails to comply with this provision, the company will be declassified as a RIC per the IRC. If this were to occur, all of MAIN's net ICTI would be subject to taxation at regular corporate tax rates. MAIN intends to distribute, at a minimum, 90% of the company's net ICTI during a tax year.

MAIN's Primary Factor Regarding Setting an Appropriate Dividend Per Share Rate - Intend to Cover the Company's ADR with Net ICTI:

To "fully" understand and accurately project a BDC's dividend sustainability, one must understand the subtle differences between a company's net investment income ("NII") and net ICTI figures/cumulative balances. As stated earlier, due to the fact MAIN continues to not have a capital loss carryforward balance, this is an extremely important concept for readers to understand. As such, let us briefly discuss this distinction.

NII is a "Generally Accepted Accounting Principles" ("GAAP") figure which is based on the accrual method of accounting. ICTI and net ICTI are IRC figures which are "generally" based on the cash method of accounting (some exceptions to this notion, but I am keeping it simple for this discussion). Income and expense recognition of certain accounting transactions differ between GAAP and the IRC (book versus tax accounting treatments). A majority of MAIN's book to tax differences (either temporary or permanent in nature) consist of the following: 1) deferred financing fees on loans and deferred offering costs in relation to equity offerings; 2) pre-tax book income (losses) related to the Internal Investment Manager; 3) share-based compensation expense; and 4) income tax (provisions) benefits. There are several additional book to tax adjustments that MAIN periodically recognizes. However, for purposes of this article, further discussion of these additional adjustments is unwarranted. Let us now move on to MAIN's dividend sustainability analysis.

To test MAIN's primary factor, I believe it is necessary to analyze and discuss the company's historical quarterly net ICTI figures to see if the company's quarterly dividend distributions were being covered. This will lead to a better understanding of the overall trends regarding this particular metric and possible pitfalls that may arise in the future. This includes MAIN using the company's cumulative UTI balance on any quarterly/annual net ICTI overpayments. Table 1 below shows MAIN's net ICTI from the fourth quarter of 2015 going back to the company's first quarter of 2015. Table 1 also shows MAIN's annual net ICTI for 2014 and 2013.

Table 1 - MAIN Net ICTI and Cumulative UTI Analysis (IRC Methodologies Based on Quarterly/Annual Time Frames):

Click to enlarge

(Source: Table created entirely by myself, partially using MAIN data obtained from the SEC's EDGAR database)

All figures within Table 1 above are checked and verified, either directly or through reconciliations, to various spreadsheets and data from MAIN's supporting documentation (excludes all ratios). Table 1 will be the main source of information as TEST 1 and TEST 2 are analyzed below.

TEST 1 - Quarterly Net ICTI Versus Quarterly Distributions Analysis:

- See Red References "A, B, C, (B / A)" in Table 1 Above Next to the December 31, 2015, Column

Using Table 1 above as a reference, I take MAIN's quarterly "net ICTI" figure (see red reference "A") and subtract this amount by the quarterly "distributions from net ICTI" figure (see red reference "B"). If MAIN's red reference "A" is greater than the company's red reference "B", then MAIN technically had enough quarterly net ICTI to pay out the company's dividend distributions for a particular quarter/year (both monthly and special periodic dividends). Any excess net ICTI left over, after accounting for MAIN's dividend distributions, is added to the company's cumulative UTI balance. This particular balance will be analyzed within TEST 2 later in the article. If MAIN's red reference "A" is less than the company's red reference "B", then the company technically did not have enough quarterly net ICTI to pay out its dividend distributions for a particular quarter/year and must use a portion of the cumulative UTI balance to help with the overpayment.

TEST 1 - Analysis and Results:

Still using Table 1 above as a reference, MAIN had annual net ICTI of $90.8 and $113.6 million for 2013 and 2014, respectively. In comparison, MAIN had annual dividend distributions of ($98.2) and ($112.0) million for 2013 and 2014, respectively. When calculated, MAIN had an annual underpayment (overpayment) of net ICTI of ($7.4) and $1.6 million for 2013 and 2014, respectively (see red reference "(A - B) = C"). This calculates to an annual dividend distributions payout ratio of 108% and 99% for 2013 and 2014, respectively (see red reference "(B / A)"). When combined, MAIN had an overpayment of net ICTI of ($5.8) million during 2013-2014 which calculated to two-year dividend distributions payout ratio of 103%. In my opinion, most would interpret this was a minor overpayment of net ICTI because this payout ratio was above the 90% IRC distribution requirement which was discussed earlier. When looking at TEST 1 on a "standalone" basis, I believe MAIN's 2013-2014 minor overpayment of net ICTI could be perceived as a "cautionary" trend regarding the company's dividend sustainability. However, with that being said, I would stress to readers all payout ratios include all of MAIN's special periodic dividends that occurred during 2013-2014. This is important to understand.

Moving to 2015, MAIN had net ICTI of $23.2, $31.9, $29.9, and $37.4 million for the first, second, third, and fourth quarters of 2015, respectively. In comparison, MAIN had dividend distributions of ($24.0), ($39.9), ($26.5), and ($41.0) million for the first, second, third, and fourth quarters of 2015, respectively. When calculated, MAIN had an underpayment (overpayment) of net ICTI of ($0.8), ($8.0), $3.4, and ($3.6) million for the first, second, third, and fourth quarters of 2015, respectively. This calculates to a dividend distributions payout ratio of 103%, 125%, 89%, and 110% for the first, second, third, and fourth quarters of 2015, respectively. When combined, MAIN had an annual overpayment of net ICTI of ($9.0) million for 2015 which calculated to an annual dividend distributions payout ratio of 107%. In my opinion, when looking at TEST 1 on a standalone basis, some readers could perceive MAIN's 2015 minor overpayment of net ICTI as a potential concern regarding the company's future dividend sustainability because this payout ratio was above the 90% IRC distribution requirement. However, with that being said, I also believe this general interpretation would be a preliminary "rush to judgment". To take this dividend sustainability analysis a step further, let us now perform TEST 2.

TEST 2 - Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio Analysis:

- See Red References "E, G, (E / G)" in Table 1 Above Next to the December 31, 2015, Column

Once again using Table 1 above as a reference, I take MAIN's "cumulative undistributed UTI" figure (see red reference "E") and divide this amount by the company's "outstanding shares of common stock" figure (see red reference "G"). From this calculation, MAIN's "cumulative UTI coverage of outstanding shares of common stock ratio" is obtained (see red reference "(E / G)"). The higher this ratio is, the more positive the results regarding MAIN's near-term dividend sustainability. Simply put, this ratio shows the amount of cumulative UTI covering the number of outstanding shares of common stock for that specified period in time. Since MAIN has continued to gradually increase the company's investment portfolio, mainly through periodic equity offerings, this ratio shows if the company has been able to increase its cumulative UTI balance by a similar proportion.

Side Note: In most BDC dividend sustainability analyses, I usually perform a test based on the company's "cumulative UTI coverage of quarterly dividend distributions" ratio (see red reference "(E / B)"). This ratio divides the company's cumulative UTI by the quarterly/annual dividend distributions. The higher this ratio is, the more positive the results regarding a BDC's near-term dividend sustainability. However, while I was performing this test on MAIN, I noticed this ratio was "skewed" whenever the company distributed a special periodic dividend. In addition, this ratio will have a noticeable difference dependent upon using a quarterly versus annual time frame. Therefore, I believe this specific test is less effective when measuring MAIN's dividend sustainability. As such, I replaced this test with the cumulative UTI coverage of outstanding shares of common stock ratio. With that being said, I still included the cumulative UTI coverage of quarterly dividend distributions ratio within Table 1 for BDC peer comparisons. However, this specific ratio will not be referenced again within this particular article.

TEST 2 - Analysis and Results:

Still using Table 1 above as a reference, MAIN had a cumulative UTI balance of $37.0 and $38.6 million at the end of the fourth quarter of 2013 and 2014, respectively. Due to MAIN's minor annual overpayment of net ICTI for 2013 and 2014 (as discussed in TEST 1), the company's cumulative UTI balance slightly decreased from $44.4 million as of 12/31/2012 to $38.6 million as of 12/31/2014. MAIN had 39.9 and 45.1 million outstanding shares of common stock at the end of the fourth quarter of 2013 and 2014, respectively. When calculated, MAIN had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.93 and 0.86 at the end of the fourth quarter of 2013 and 2014, respectively. Even though MAIN had a minor annual net ICTI underpayment for 2014 (as discussed in TEST 1), due to the fact the company continued to increase its outstanding shares of common stock throughout the year, this ratio slightly decreased. However, with that being said, this ratio was still at attractive levels throughout most of the year (especially when compared to most BDC peers). Considering MAIN distributed two special periodic dividends during 2014, the company continued to have a fairly sizeable cumulative UTI balance (proportionately speaking).

Moving to 2015, MAIN had a cumulative UTI balance of $37.9, $29.9, $33.3, and $29.7 million at the end of the first, second, third, and fourth quarters of 2015, respectively. Due to MAIN's minor annual net ICTI overpayment for 2015 (as discussed in TEST 1), the company's cumulative UTI balance slightly decreased from $38.6 million as of 12/31/2014 to $29.7 million as of 12/31/2015. MAIN had 49.6, 49.9, 50.1, and 50.4 million outstanding shares of common stock at the end of the first, second, third, and fourth quarters of 2015, respectively. When calculated, MAIN had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.76, 0.60, 0.66, and 0.59 at the end of the first, second, third, and fourth quarters of 2015, respectively. Even though this ratio net decreased during 2015, I still believe MAIN's ratio as of 12/31/2015 was a nice "cushion" per se to have. Furthermore, MAIN's special periodic dividends that were distributed during June 2015 and December 2015 impacted the company's cumulative UTI balance as of 12/31/2015. This same trend occurred during MAIN's second and fourth quarters of 2014. Compared to what recently occurred with some higher-yielding BDC peers like Prospect Capital Corp. (NASDAQ:PSEC), Fifth Street Finance Corp. (NASDAQ:FSC), and Medley Capital Corp. (NYSE:MCC) which had material dividend per share reductions in late 2014/early 2015, MAIN has continued to basically match net ICTI with dividend distributions. This includes accounting for MAIN's special periodic dividends.

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support MAIN's steady to slightly increasing monthly dividend per share rates over the past several years. TEST 2 also supports MAIN's special periodic dividends that were declared for 2014 and 2015. As important, I am projecting MAIN will increase the company's cumulative UTI balance, hence its cumulative UTI coverage of outstanding shares of common stock ratio, during the first quarter of 2016. I believe this should be seen as a positive trend. Now let us transition to a more "forward-looking" dividend sustainability analysis regarding MAIN's special periodic dividends.

TEST 3 - Cumulative Unrealized Appreciation (Depreciation) Coverage of Outstanding Shares of Common Stock Ratio Analysis:

- See Red References "H, I, J, G, (J / G)" in Table 2 Below Next to the December 31, 2015, Column

To begin TEST 3, let us first get accustomed to the information provided in Table 2 below.

Table 2 - MAIN Cumulative Unrealized Appreciation (Depreciation) Coverage of Outstanding Shares of Common Stock Ratio Analysis (Based on Quarterly Time Frames):

Click to enlarge

(Source: Table created entirely by myself, partially using MAIN data obtained from the SEC's EDGAR database (link provided below Table 1))

Using Table 2 above as a reference, I take MAIN's "cumulative unrealized appreciation (depreciation) on investments" figure (see red reference "H") and subtract from this amount the cumulative unrealized gain in regards to MAIN's external investment manager, Main Street Capital Adviser I, LLC (MSC Adviser I; see red reference "I"). This calculates to MAIN's "cumulative unrealized appreciation (depreciation) on investments (less external investment manager)" figure (see red reference "(H - I) =J").

MSC Adviser I was formed in November 2013 as a wholly-owned subsidiary of MAIN to provide investment management and other services to external parties. For rendering these services, MSC Adviser I receives fee income. Readers should not confuse this specific portfolio company with the fact that MAIN is internally managed. In my professional opinion, it is currently a very low probability MSC Adviser I will have a realized gain in the near future due to the underlying nature of this wholly-owned subsidiary. As such, for a more accurate projection of MAIN's future special periodic dividends, I exclude the cumulative unrealized gain from this specific portfolio company.

Table 2 then divides this amount by the company's "outstanding shares of common stock" figure (see red reference "G"). From this calculation, MAIN's "cumulative unrealized appreciation (depreciation) coverage of outstanding shares of common stock ratio (less external investment manager)" is obtained (see red reference "(J / G)"). The higher this ratio is, the more positive the results regarding MAIN continuing to declare special periodic dividends. Basically, this ratio shows the amount of cumulative unrealized gains covering the number of outstanding shares of common stock for that specified period in time. Since MAIN has continued to gradually increase the company's investment portfolio, mainly through periodic equity offerings, this ratio shows if the company has been able to increase its cumulative unrealized gain by a similar proportion.

I believe this is a good test to perform because MAIN's unrealized gains (losses) will eventually become a realized event. However, one unknown variable in this equation is time. It cannot be determined if MAIN will realize a particular investment gain (loss) during the next quarter, next year, or even further out on the time horizon. However, it is a general "rule of thumb" that the larger a company's cumulative unrealized gain balance becomes, the greater the probability of realized gains occurring at some point in the future. In the end, management has the ultimate decision when to realize/monetize certain investments within MAIN's portfolio. With that being said, I still believe TEST 3 is a good general indicator of possible future realized gains which will directly lead to MAIN being able to continue to pay special periodic dividends.

TEST 3 - Analysis and Results:

Still using Table 2 above as a reference, after a minor prior-period reclassification, MAIN had a cumulative unrealized appreciation balance of $105.8, $118.5, $99.5, and $82.7 million at the end of the first, second, third, and fourth quarters of 2014, respectively. After backing out the cumulative unrealized gain attributable to MSC Adviser I, MAIN had a cumulative unrealized appreciation balance (less the external investment manager) of $103.4, $113.7, $90.9, and $67.1 million at the end of the first, second, third, and fourth quarters of 2014, respectively. MAIN had 39.9, 44.9, 44.9, and 45.1 million outstanding shares of common stock at the end of the first, second, third, and fourth quarters of 2014, respectively. When calculated, MAIN had a cumulative unrealized appreciation coverage of outstanding shares of common stock ratio (less the external investment manager) of 2.59, 2.53, 2.02, and 1.49 at the end of the first, second, third, and fourth quarters of 2014, respectively. Even though MAIN's ratio decreased throughout 2014, this ratio was still at a very attractive level as of 12/31/2014 (especially when compared to most sector peers who had deficit balances).

Moving to 2015, after a minor prior-period reclassification, MAIN had a cumulative unrealized appreciation balance of $96.8, $115.9, $110.1, and $101.4 million at the end of the first, second, third, and fourth quarters of 2015, respectively. After backing out the cumulative unrealized gain attributable to MSC Adviser I, MAIN had a cumulative unrealized appreciation balance (less the external investment manager) of $71.9, $86.0, $77.8, and $74.1 million at the end of the first, second, third, and fourth quarters of 2015, respectively. As such, this balance had a minor net increase during 2015. MAIN had 49.6, 49.9, 50.1, and 50.4 million outstanding shares of common stock at the end of the first, second, third, and fourth quarters of 2015, respectively. When calculated, MAIN had a cumulative unrealized appreciation coverage of outstanding shares of common stock ratio (less the external investment manager) of 1.45, 1.72, 1.55, and 1.47 at the end of the first, second, third, and fourth quarters of 2015, respectively. After a slight decrease in this ratio during the first quarter of 2015, MAIN was able to modestly increase this ratio during the second quarter of 2015. However, this ratio modestly decreased during the second half of 2015 as credit markets in general had heightened volatility which put pressure on spreads/valuations. I anticipate this heightened volatility abated towards the end of the first quarter of 2016. With all things considered, MAIN still had a very attractive cumulative unrealized appreciation coverage of outstanding shares of common stock ratio as of 12/31/2015 (especially when compared to most sector peers that continued to have large deficit balances).

It should also be mentioned on 1/20/2016, MAIN disclosed to the public the company recognized a $14.4 million realized gain upon the sale of its investment in Southern RV, LLC (Southern). Simply put, this realized gain should help "boost" MAIN's net ICTI during the first quarter of 2016 and help solidify the assumption the company will declare/distribute another special periodic dividend during the first half of 2016. Furthermore, on 4/14/2016, MAIN disclosed to the public one of the company's portfolio companies Samba Holdings, Inc. (Samba) completed a recapitalization with an outside private equity group. In conjunction with this recapitalization, Samba repaid its debt obligation to MAIN. In addition, MAIN exited the company's equity investment in Samba. This event will lead to a notable realized gain during MAIN's second quarter of 2016, helping to support the company's special periodic dividend for the first and second half of 2016. I believe this event should be seen as a positive trend regarding MAIN's future dividend sustainability.

Conclusions Drawn:

To sum up the information in this article, three dividend sustainability tests were performed on MAIN. The first two tests were based on MAIN's net ICTI and cumulative UTI which are based on IRC methodologies. TEST 1 provided the following information in regards to MAIN's net ICTI payout ratio for 2013, 2014, and 2015, respectively:

MAIN's 2013 and 2014 Annual Net ICTI Payout Ratio: 108% and 99%

MAIN's Q1, Q2, Q3, and Q4 2015 Net ICTI Payout Ratio: 103%, 125%, 89%, and 110%

When combined, MAIN had an annual overpayment of net ICTI of ($9.0) million for 2015 which calculated to an annual dividend distributions payout ratio of 107%. In my opinion, when looking at TEST 1 on a standalone basis, some readers could perceive MAIN's 2015 minor overpayment of net ICTI as a potential concern regarding the company's future dividend sustainability. However, with that being said, I also believe this general interpretation would be a preliminary rush to judgment. As such, TEST 2 was then performed which analyzed MAIN's cumulative UTI balance.

TEST 2 provided the following information in regards to MAIN's cumulative UTI coverage of outstanding shares of common stock ratio for 2013, 2014, and 2015, respectively:

MAIN's Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 12/31/2013 and 12/31/2014: 0.93 and 0.86

MAIN's Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 3/31/2015, 6/30/2015, 9/30/2015, and 12/31/2015: 0.76, 0.60, 0.66, and 0.59

In my opinion, considering TEST 2 on a standalone basis, this evidence helps support MAIN's steady to slightly increasing monthly dividend per share rates over the past several years. TEST 2 also supports MAIN's special periodic dividends that were declared for 2014 and 2015. Even though this ratio net decreased during 2015, I still believe MAIN's ratio as of 12/31/2015 was a nice cushion per se to have, especially when compared to most sector peers. MAIN has continued to basically match net ICTI with dividend distributions. This includes taking special periodic dividends into consideration. As important, I am projecting MAIN will increase the company's cumulative UTI balance, hence its cumulative UTI coverage of outstanding shares of common stock ratio, during the first quarter of 2016. I believe this should be seen as a positive trend.

When looking at the results from TEST 1 and TEST 2, I have concluded the probability of MAIN being able to maintain or slightly increase the company's monthly dividend per share rate in the next set of dividend declarations is high (80%).

As such, I am projecting MAIN will declare the following monthly dividends for June 2016, July 2016, and August 2016:

Dividend for June 2016 (Paid in July 2016): $0.18-0.185 per share

Dividend for July 2016 (Paid in August 2016): $0.18-0.185 per share

Dividend for August 2016 (Paid in September 2016): $0.18-0.185 per share

Next, TEST 3 provided the following information in regards to MAIN's cumulative unrealized appreciation coverage of outstanding shares of common stock ratio (less the external investment manager) for the first quarter of 2014 through the fourth quarter of 2015, respectively:

MAIN's Cumulative Unrealized Appreciation Coverage of Outstanding Shares of Common Stock Ratio (Less External Investment Manager) as of 3/31/2014, 6/30/2014, 9/30/2014, and 12/31/2014: 2.59, 2.53, 2.02, and 1.49

MAIN's Cumulative Unrealized Appreciation Coverage of Outstanding Shares of Common Stock Ratio (Less External Investment Manager) as of 3/31/2015, 6/30/2015, 9/30/2015, and 12/31/2015: 1.45, 1.72, 1.55, and 1.47

When looking at the results from TEST 2 and TEST 3, I have concluded the probability of MAIN being able to declare a special periodic dividend during the first-half of 2016 remains high (80%).

As such, I am reiterating MAIN will declare in late April the following special periodic dividend to be distributed in June 2016.

Next Special Periodic Dividend (Likely to be Paid in June 2016): $0.25-0.30 per share

A prior BDC comparison article I wrote provided some recent, more general dividend sustainability metrics regarding 10 BDC peers (including MAIN). For additional analysis related to this topic, I refer readers to the following article:

Prospect Capital's NAV, Dividend, And Valuation Compared To 9 BDC Peers (Post Calendar Q4 2015 Earnings) - Part 2

MAIN continues to have one of the most attractive cumulative unrealized gain balances in the sector. Any minor/modest depreciation in valuations should not have any material impact to MAIN's near-term monthly or special periodic dividend sustainability. Simply put, MAIN continues to have an attractive investment portfolio and is currently at low risk for a dividend reduction over the foreseeable future.

My BUY, SELL, or HOLD Recommendation:

From the analysis provided above, including additional factors not discussed within this article, I currently rate MAIN as a SELL when the company's stock price is trading at or greater than a 50% premium to my projected NAV as of 3/31/2016, a HOLD when trading at greater than a 30% but less than 50% premium to my projected NAV as of 3/31/2016, and a BUY when trading at or less than a 30% premium to my projected NAV as of 3/31/2016. This is a recent valuation "upgrade" when compared to my last MAIN article. As of 4/18/2016, MAIN's stock price traded at $31.33 per share.

As such, I currently rate MAIN as a HOLD.

Final Note: I first initiated a position in MAIN on 9/28/2015 at a weighted average purchase price of $26.335 per share. This trade was disclosed to readers on 9/28/2015 in "real time" (within an hour) via the "StockTalks" feature of Seeking Alpha. On 11/3/2015, I sold my entire position in MAIN at a weighted average sales price of $30.515 per share as the stock surpassed my price target at the time of $30.50 per share. This trade was also disclosed to readers on 11/3/2015 in real time (within an hour) via the StockTalks feature of Seeking Alpha.

On 1/14/2016, I once again initiated a position in MAIN at a weighted average purchase price of $26.575 per share. I increased my position in MAIN on 1/20/2016 at a weighted average purchase price of $24.765 per share to take advantage of a market sell-off in the BDC sector. My second purchase was approximately double the monetary amount of my 1/14/2016 purchase. Once again, these trades were disclosed to readers in real time (within an hour) via the StockTalks feature of Seeking Alpha. On 1/29/2016, I sold my entire position in MAIN at a weighted average sales price of $29.835 per share as the stock surpassed my price target at the time of $29.75 per share. This trade was also disclosed to readers on 1/29/2016 in real time (within an hour) via the StockTalks feature of Seeking Alpha. Each weighted average per share price excluded all dividends received/reinvested (where applicable).

Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal recommendation will not fit each reader's current investing strategy.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.