Main Street Capital Corporation (NYSE:MAIN) is an investment company that provides long-term debt and equity capital to small- and medium-sized companies. The funds it invests are often used by companies to create growth, complete a management buyout, refinance existing debt, and make acquisitions. The companies it invests in typically have annual revenues of between $10 million and $150 million. Main Street collects interest, fees and also makes profits when its equity investments appreciate in value. It uses the earnings from these varied revenue sources to pay shareholders a strong rate of return in the form of a dividend.
Main Street is invested in a broad range of industries such as: technology, healthcare, financial services, restaurants, automotive, equipment rental, manufacturing and many more. The Main Street investment portfolio includes companies like Affinity VideoNet, Inc. (a provider of high-definition video conferencing solutions), American Sensor Technologies, Inc. (a designer and manufacturer of industrial sensors), AmeriTech College Operations, LLC. (a for-profit college providing nursing and healthcare degrees), Bridge Capital Solutions Corporation (a financial services firm), Cafe Brazil, LLC (which operates restaurants), Compact Power Equipment Centers, LLC (an equipment rental company), among others.
The diversification in Main Street's portfolio reduces the risks for the company, and its shareholders. Here are three reasons to consider buying the stock:
1) Analysts at Zacks Investment Research recently upgraded the stock to their #1 ranked "strong buy" rating. Zacks states:
"With a solid year-to-date return of 30.2%, a history of beating quarterly earnings estimates as well as a steady dividend increase trend, this stock offers an attractive investment opportunity."
2) Main Street Capital recently reported strong financial results. For the second quarter ended June 30, 2012, it had total investment income of $20.8 million, which was a 29% increase from the second quarter 2011. Net asset value jumped about 11% to $16.89 per share on June 30, 2012, compared to $15.19 per share on December 31, 2011.
3) The dividend is yield is generous and the company just raised it even further to 15 cents per share per month for October, 2012. This represents an increase of about 11.1% from the dividends declared for the fourth quarter of 2011. Most companies only pay a dividend on a quarterly basis, but this company pays on a monthly basis, which is ideal for many investors.
In addition, this stock will provide a yield that more than doubles what many popular dividend stocks offer. For example, General Electric (NYSE:GE) yields just 3.3%, and although many investors think of it as an industrial company, General Electric does a significant amount of financing for companies as well. American Express Company (NYSE:AXP) yields just 1.4% and it also provides business capital to many small- and medium-sized companies. Capital One Finance (NYSE:COF) offers even less, with a yield of just .4%.
While most investors have heard of those major companies, it can pay to stay off the beaten-path by investing in much higher-yielding stocks like Main Street Capital.
Here are some key points for MAIN:
- Current share price: $27.67
- The 52 week range is $16.80 to $27.95
- Earnings estimates for 2012: $1.89 per share
- Earnings estimates for 2013: $1.97 per share
- Annual dividend: $1.80 per share, which yields about 7%
Data is sourced from Yahoo Finance.
Disclosure: I 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.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.