Main Street Capital's Monthly Dividend Projection For June-August 2017

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Summary

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

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

The third test will focus on the probability of MAIN continuing to provide special periodic dividends in the future. This includes a specific projection for the second half of 2017.

It is important for readers to understand the difference between MAIN’s NII and net ICTI regarding consistent, reliable dividend sustainability metrics and projections.

Summarized results from the three tests performed, including a projection for MAIN’s monthly dividend for June-August 2017, are stated within the “Conclusions Drawn” section of the article.

Author's Note: This article is a detailed analysis of Main Street Capital Corp.'s (NYSE:MAIN) dividend sustainability. I have performed this analysis due to the continued number of readers who have specifically requested such an analysis be performed on MAIN at periodic intervals. For readers who just want the summarized conclusions/results, I would suggest scrolling 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"). 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 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-August 2017 and my projection regarding the company's special periodic dividend for the second half of 2017.

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.

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 any 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. This is a very similar taxation treatment when compared to a real estate investment trust ("REIT") 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 carry over 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'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, readers 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 to understand. As such, let us briefly discuss this distinction.

NII is a Generally Accepted Accounting Principles ("GAAP") figure that is based on the accrual method of accounting. ICTI and net ICTI are IRC figures that are generally based on the cash method of accounting (some exceptions to this notion (for instance payment-in-kind income) 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 "free to the public" 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 its 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. By using this methodology, I have consistently provided accurate projections.

Table 1 below shows MAIN's net ICTI for the first, second, third, and fourth quarters of 2016. Table 1 also shows MAIN's annual net ICTI for 2014 and 2015:

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

(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, 2016 Column

Using Table 1 above as a reference, I take MAIN's quarterly/annual "net ICTI" figure (see red reference "A") and subtract this amount by the quarterly/annual "distributions from net ICTI" figure (see red reference "B"). If red reference "A" is greater than red reference "B," then MAIN technically had enough quarterly/annual net ICTI to pay out the company's dividend distributions for that particular period of time (both monthly and special periodic dividends where applicable). 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 red reference "A" is less than red reference "B", then MAIN technically did not have enough quarterly/annual net ICTI to pay out the company's 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 $113.6 and $122.5 million for 2014 and 2015, respectively. In comparison, MAIN had annual dividend distributions of ($112.0) and ($131.4) million, respectively. When calculated, MAIN had an annual underpayment (overpayment) of net ICTI of $1.6 and ($9.0) million for 2014 and 2015, respectively (see red reference "(A - B) = C"). This calculates to an annual dividend distributions payout ratio of 99% and 107% for 2014 and 2015, respectively (see red reference "(B / A)"). When combined, MAIN had an overpayment of net ICTI of ($7.4) million during 2014-2015, which calculates to a two-year dividend distribution payout ratio of 103%.

In my opinion, most readers would view this as a minor overpayment of net ICTI. When looking at TEST 1 on a "standalone" basis, I believe MAIN's 2014-2015 minor overpayment of net ICTI could be perceived as a "cautionary" trend regarding the company's dividend sustainability. However, with that being said, I also believe this general interpretation would be a preliminary "rush to judgment". I would stress to readers that these payout ratios include all of MAIN's special periodic dividends that occurred during 2014-2015. This is very important to understand.

Moving to 2016, MAIN had net ICTI of $29.4, $49.9, $51.3, and $24.6 million for the first, second, third, and fourth quarters of 2016, respectively. The notable increase in net ICTI for the second quarter of 2016 was mainly due to the sale of MAIN's equity investment in Samba Holdings, Inc. (Samba). As a result of this sale, MAIN reported a realized gain of approximately $28.4 million. The elevated net ICTI for the third quarter of 2016 was mainly due to the sale of MAIN's equity investment in Travis Acquisition, LLC (Travis). As a result of this sale, MAIN reported a realized gain of approximately $17.9 million. The notable decrease in net ICTI for the fourth quarter of 2016 was mainly due to MAIN reporting a minor realized loss during the quarter (as opposed to notable realized gains during the previous two quarters). In comparison, MAIN had dividend distributions of ($27.3), ($42.0), ($28.7), and ($44.6) million, respectively. MAIN's dividend distributions for the second and fourth quarters of 2016 were notably higher due to the company's special periodic dividend of $0.275 per share that was paid in June 2016 and December 2016. When calculated, MAIN had an underpayment (overpayment) of net ICTI of $2.1, $7.9, $22.6, and ($19.9) million for the first, second, third, and fourth quarters of 2016, respectively. This calculates to a dividend distributions payout ratio of 93%, 84%, 56%, and 181%, respectively. When combined, MAIN had an underpayment of net ICTI of $12.7 million during 2016, which calculates to an annual dividend distributions payout ratio of 92%.

In my opinion, when looking at TEST 1 on a standalone basis, I believe readers should view MAIN's minor annual underpayment of net ICTI during 2016 as an encouraging sign for steady-slightly increasing monthly dividend per share rates through at least August 2017. In addition, I believe it was impressive MAIN had a minor underpayment of net ICTI when two special periodic dividends were distributed. 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, 2016 Column

Once again using Table 1 above as a reference, I take MAIN's "cumulative 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 future dividend sustainability. Simply put, this ratio shows the amount of cumulative UTI covering the number of outstanding shares of common stock for that specified point in time. Since MAIN has continued to gradually increase the company's investment portfolio, recently through periodic "at-the-market" ("ATM") equity offerings, this ratio shows if the company has been able to increase its cumulative UTI balance by a similar proportion.

TEST 2 - Analysis and Results

Still using Table 1 above as a reference, MAIN had a cumulative UTI balance of $38.6 and $29.7 million at the end of the fourth quarter of 2014 and 2015, respectively. Due to MAIN's two-year overpayment of net ICTI (as discussed in TEST 1 earlier), the company's cumulative UTI balance decreased from $37.0 million as of 12/31/2013 to $29.7 million as of 12/31/2015. MAIN had 45.1 and 50.4 million outstanding shares of common stock at the end of the fourth quarter of 2014 and 2015, respectively. When calculated, it had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.86 and 0.59 at the end of the fourth quarter of 2014 and 2015, respectively. Even when considering the drop to this ratio, the cumulative UTI balance as of 12/31/2015 was still at a fairly attractive level (especially when compared to most BDC peers). In addition, considering MAIN distributed special periodic dividends during 2014-2015 (which most BDC peers did not declare), the company continued to have an attractive cumulative UTI balance (proportionately speaking).

Moving to 2016, MAIN had a cumulative UTI balance of $31.8, $39.7, $62.3, and $42.4 million at the end of the first, second, third, and fourth quarters of 2016, respectively. It had 50.8, 52.1, 52.9, and 54.4 million outstanding shares of common stock at the end of the first, second, third, and fourth quarters of 2016, respectively. When calculated, the company had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.63, 0.76, 1.18, and 0.78 at the end of the first, second, third, and fourth quarters of 2016, respectively. Even though this ratio modestly decreased during 2015, MAIN was able to modestly increase this ratio during 2016.

Even though the cumulative UTI balance experienced a notable decrease during the fourth quarter of 2016, I still believe the company's ratio as of 12/31/2016 was a nice "cushion" per se to have. Compared to what recently occurred with some higher-yield BDC peers like Apollo Investment Corp. (NASDAQ:AINV), Fifth Street Finance Corp. (FSC), Fifth Street Senior Floating Rate Corp. (FSFR), and Medley Capital Corp. (NYSE:MCC) which had material dividend per share reductions during 2016-2017, MAIN has continued to have sufficient net ICTI for the company's dividend distributions (with a surplus). This includes accounting for the special periodic dividends.

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support MAIN's steady-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 2014-2016. This is a good segue in transitioning to a more "forward-looking" dividend sustainability analysis regarding MAIN's special periodic dividend.

TEST 3 - Cumulative Unrealized Appreciation 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, 2016 Column

To begin TEST 3, let us first take a look at the information provided in Table 2 below:

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

(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 on investments" figure (see red reference "H") and subtract from this amount the cumulative unrealized appreciation 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 on investments (less external investment manager)" figure (see red reference "(H - I) =J").

Side Note: 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 that 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 appreciation 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 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 future special periodic dividends. Basically, this ratio shows the amount of cumulative unrealized appreciation covering the number of outstanding shares of common stock for that specified point in time. Since MAIN has continued to gradually increase the company's investment portfolio, recently through periodic ATM equity offerings, this ratio shows if the company has been able to increase its cumulative unrealized appreciation balance by a similar proportion.

I believe this is a good test to perform because MAIN's unrealized appreciation (depreciation) 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 further out on the time horizon. However, it is a general "rule of thumb" that the larger a company's cumulative unrealized appreciation 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 certain investments within MAIN's portfolio. With that being said, I believe MAIN considers this notion when determining when to "monetize" certain portfolio investments. As such, I believe TEST 3 is a good indicator of possible future realized gains, which directly leads to MAIN being able to continue to pay special periodic dividends ("forward-looking" metric).

TEST 3 - Analysis and Results

Still using Table 2 above as a reference, MAIN had a cumulative unrealized appreciation balance of $82.7 and $101.4 million at the end of the fourth quarter of 2014 and 2015, respectively. After backing out the cumulative unrealized appreciation attributable to MSC Adviser I, MAIN had a cumulative unrealized appreciation balance (less the external investment manager) of $67.1 and $74.1 million, respectively. It had 45.1 and 50.4 million outstanding shares of common stock at the end of the fourth quarter of 2014 and 2015, respectively. When calculated, the company had a cumulative unrealized appreciation coverage of outstanding shares of common stock ratio (less the external investment manager) of 1.49 and 1.47 at the end of the fourth quarter of 2014 and 2015, respectively. Even though MAIN's ratio slightly decreased during 2015, this ratio was still at a very attractive level as of 12/31/2015 (especially when compared to most sector peers who had deficit balances). I believe this is one reason why the market continues to value MAIN at a substantial premium to most BDC peers.

Moving to 2016, MAIN had a cumulative unrealized appreciation balance of $79.2, $67.1, $75.4, and $96.9 million at the end of the first, second, third, and fourth quarters of 2016, respectively. After backing out the cumulative unrealized appreciation attributable to MSC Adviser I, MAIN had a cumulative unrealized appreciation balance (less the external investment manager) of $51.5, $40.1, $45.3, and $66.3 million at the end of the first, second, third, and fourth quarters of 2016, respectively. MAIN had 50.8, 52.1, 52.9, and 54.4 million outstanding shares of common stock at the end of the first, second, third, and fourth quarters of 2016, respectively. When calculated, the company had a cumulative unrealized appreciation coverage of outstanding shares of common stock ratio (less the external investment manager) of 1.01, 0.77, 0.86, and 1.22 at the end of the first, second, third, and fourth quarters of 2016, respectively. As such, this ratio notably decreased during the first and second quarters of 2016, slightly increased during the third quarter of 2016, and notably increased during the fourth quarter of 2016.

Regarding the decrease during the first quarter of 2016, this was mainly due to the heightened volatility in credit markets during the second half of 2015-the first half of the first quarter of 2016. Simply put, this event put added pressure on spreads/valuations for a majority of lower middle market ("LMM") and middle market ("MM") debt investments. Regarding the decrease in the second quarter of 2016, this was mainly due to the unrealized to realized reclassified gain of Samba (discussed earlier) partially offset by net unrealized appreciation within MAIN's investment portfolio. Regarding the increase in the third quarter of 2016, this was mainly due to modest net unrealized appreciation within MAIN's investment portfolio partially offset by the unrealized to realized reclassified gain of Travis (discussed earlier). Regarding the notable increase during the fourth quarter of 2016, this was mainly due to the continued strong demand for LMM and MM investments with low credit risk (and non-government bonds in general). This led to increased prices hence decreased yield spreads on new debt/bonds.

With all things considered, MAIN had an attractive cumulative unrealized appreciation coverage of outstanding shares of common stock ratio as of 12/31/2016 (especially when compared to most sector peers which continued to have large deficit balances). It should also be noted that a majority of LMM/MM debt investments with low credit risk continued to experience net price increases during the first quarter of 2017 (spreads tightened; prices slightly "reversed course" in March though).

It should also be mentioned on 12/29/2016 MAIN first disclosed to the public one of the company's portfolio companies Daseke, Inc. (Daseke) entered into a merger agreement with Hennessy Capital Acquisition Corp. II. In conjunction with the completion of this merger, Daseke repaid its debt obligation to MAIN. Furthermore, MAIN exited the company's equity investment in Daseke and reported a realized gain of approximately $22.9 million during the first quarter of 2017. Simply put, this event helps provide a cushion for MAIN's upcoming special periodic dividend that will be declared in April 2017 and will likely be paid in June 2017. I believe this 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 2014, 2015, and 2016, respectively:

MAIN's 2014, 2015, and 2016 Annual Net ICTI Payout Ratio: 99%, 107%, and 92%

I believe readers should view MAIN's minor underpayment of net ICTI during 2016 as an encouraging sign for steady-slightly increasing monthly dividend per share rates through at least August 2017. In addition, I believe it was impressive MAIN had a minor underpayment of net ICTI during 2016 when two special periodic dividends were distributed.

To gain further clarity, 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 at the end of 2014, 2015, and the first-fourth quarters of 2016, respectively:

  • MAIN's Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 12/31/2014 and 12/31/2015: 0.86, and 0.59
  • MAIN's Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 3/31/2016, 6/30/2016, 9/30/2016, and 12/31/2016: 0.63, 0.76, 1.18, and 0.78

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support MAIN's steady-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 2014-2016. Even though the cumulative UTI balance experienced a notable decrease during the fourth quarter of 2016, I still believe the ratio as of 12/31/2016 was a nice cushion, per se, to have.

When looking at the results from TEST 1 and TEST 2, I have concluded that the probability of MAIN being able to maintain-slightly increase the company's monthly dividend per share rate in its next set of dividend declarations is very high (90%). As such, I am projecting that MAIN will declare the following monthly dividends for June-August 2017:

  • Dividend for June 2017 (Paid in July 2017): $0.185-0.19 per share
  • Dividend for July 2017 (Paid in August 2017): $0.185-0.19 per share
  • Dividend for August 2017 (Paid in September 2017): $0.185-0.19 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 2014, 2015, and the first-fourth quarters of 2016, respectively:

  • MAIN's Cumulative Unrealized Appreciation Coverage of Outstanding Shares of Common Stock Ratio (Less External Investment Manager) as of 12/31/2014 and 12/31/2015: 1.49 and 1.47, respectively
  • MAIN's Cumulative Unrealized Appreciation Coverage of Outstanding Shares of Common Stock Ratio (Less External Investment Manager) as of 3/31/2016, 6/30/2016, 9/30/2016, and 12/31/2016: 1.01, 0.77, 0.86, and 1.22, respectively

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 for the second half of 2017 is very high (90%). This projection/probability is mainly due to the realized gain of approximately $22.9 million in regards to the recent sale of Daseke. As such, I am projecting MAIN will declare in October 2017 (a future event) the following special periodic dividend to be distributed in December 2017:

Special Periodic Dividend for the Second Half of 2017 (Likely To Be Distributed December 2017): $0.275-0.35 per share

MAIN continues to have one of the most attractive cumulative unrealized appreciation balances in the sector, even with the decrease to this specific balance over the prior several years. A prior BDC comparison article I wrote provided some recent, more generalized dividend sustainability metrics regarding 11 BDC peers that I current cover (including MAIN). For additional analysis related to this topic, I refer readers to the following article:

Prospect Capital Corp.'s Valuation, NAV, And Dividend Compared To 10 BDC Peers (Post Calendar Q4 2016 Earnings) - Part 2(Including Dividend Sustainability Probabilities For All Companies)

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 65% premium to the mean of its projected NAV as of 3/31/2017 range, a HOLD when trading at greater than a 50% but less than a 65% premium to the mean of its projected NAV as of 3/31/2017 range, and a BUY when trading at or less than a 50% premium to the mean of its projected NAV as of 3/31/2017 range. These percentage ranges are a slight improvement when compared to my last MAIN article (approximately three months ago) due to the company's gradual increase in NII, attractive realized gains in regards to several recently exited portfolio companies, and the continued "uptick" in most LMM/MM loan pricing where credit risk remains low. My projected MAIN NAV as of 3/31/2017 range is $22.30-22.90 per share.

As such, I currently rate MAIN as a SELL (however, fairly close to my HOLD range). My current price target for MAIN is approximately $37.30 per share. This is currently the price where my SELL recommendation would change to a HOLD. This price target is a $1.95 per share increase when compared to my last MAIN article. My current re-entry price for MAIN is approximately $33.90 per share. This is currently the price where my recommendation would change to a BUY. This re-entry price is a $1.85 per share increase when compared to my last MAIN article.

My current SELL recommendation is due to the fact MAIN continues to have a stock price valuation that, in my opinion, is an excessive premium to the company's BDC peers. Even though I believe MAIN's dividend sustainability is currently very high (focus of this particular article), I believe the company's stock price valuation already considers this notion and then some. With that being said, long-term holders of MAIN should gain comfort that I continue to believe its dividend sustainability is currently very high.

Final Note: 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. The factual information provided within this article is intended to help assist readers when it comes to investing strategies/decisions.

All trades/investments I have performed over the past few years have been disclosed to readers in "real time" (that day at the latest) via the "StockTalks" feature of Seeking Alpha. Through this resource, readers can look up all my prior disclosures (buys/sells) regarding all companies I cover here at Seeking Alpha (see my profile page for a list of all stocks covered).

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.