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Yahoo
21 hours ago
- Business
- Yahoo
Why I Finally Added This Magnificent High-Yielding Monthly Dividend Stock to My Portfolio
Main Street Capital has never suspended or reduced its monthly dividend. It has grown its payout by 132% since late 2007. The BDC also typically pays a supplemental dividend each quarter. 10 stocks we like better than Main Street Capital › My main financial goal is to grow my passive income to the point where it can fully fund my basic living expenses. Reaching that target will provide me with a high level of financial freedom. It will also give me more peace of mind knowing I won't have to worry if my income from working ever takes a big hit. I work toward my goal by steadily investing more money in income-generating assets, like high-yielding dividend stocks. I'm always on the lookout for new passive income sources. One that I finally added to my portfolio is Main Street Capital (NYSE: MAIN). After overlooking the company for years, I've come to realize it's a magnificent passive income producer. Main Street Capital is a business development company (BDC). It provides debt and equity capital to lower-middle-market companies (those with revenues between $10 million and $150 million). It also provides loans to larger companies. The BDC provides smaller companies with the capital they need to fund their operations and grow their businesses. It structures its investments to deliver three objectives: protecting its invested capital, delivering high recurring income, and providing opportunities for meaningful capital gains. The company's secured debt investments generate a high yield. Its current portfolio has a 12.4% weighted average cash coupon. That supplies the company with recurring interest income to fund dividend payments. Meanwhile, its equity investments provide dividend income (63% of its holdings pay dividends) and additional upside potential as the value of its equity investments increases. As a BDC, Main Street Capital must distribute 90% of its income to investors via dividends to comply with IRS regulations (like a real estate investment trust, or REIT). It does that in two ways. Main Street Capital pays regular monthly dividends. It sets the base dividend at a level that can be conservatively covered with its earnings. That enables the company to provide investors with significant comfort knowing they'll receive this recurring income stream. It has never suspended or reduced its dividend level since its initial public offering (IPO). It has paid a dividend either at or above the prior month's rate every month since its IPO. While it hasn't increased its dividend level every year, it has steadily hiked the payout, growing it by 132% since late 2007. Main Street recently raised its monthly dividend by 2% and has increased it by 4.2% over the past year. The company's dividend track record stands in stark contrast to that of other BDCs, with 78% of them having reduced their dividend rate at least once during that period or since their subsequent IPOs and 50% having cut their dividends multiple times. The sector's lackluster dividend track record is why I never looked into Main Street Capital until recently. Main Street Capital also pays supplemental dividends to reach its target payout level, typically once per quarter. It has been paying $0.30 per share in supplemental dividends each quarter over the past year and a half in addition to its $0.255 monthly dividend. That puts its total dividend outlay at $1.065 per share over the past quarter, giving it an annualized yield of 8%. These additional payments can vary depending on earnings and market conditions. For example, it paid less in supplemental dividends during the pandemic. Nevertheless, it's a nice additional income stream. I like to invest in companies that pay a high-yielding, steadily rising dividend because they should help me reach my passive income target sooner. Main Street Capital does that and more, thanks to the addition of its supplemental dividends. That's why I'm excited to have finally added this magnificent dividend stock to my portfolio. I plan to continue building my position as I have the cash to invest, because I believe Main Street can provide me with a lot of dividend income in the future. Before you buy stock in Main Street Capital, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Main Street Capital wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor's total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 23, 2025 Matt DiLallo has positions in Main Street Capital. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Why I Finally Added This Magnificent High-Yielding Monthly Dividend Stock to My Portfolio was originally published by The Motley Fool
Yahoo
12-06-2025
- Business
- Yahoo
1 Incredible High-Yielding Monthly Dividend Stock I Plan to Buy in June for Passive Income
Main Street Capital has done an incredible job of paying dividends over the years The BDC pays a steadily rising monthly dividend and periodically pays supplemental dividends. It gives investors the comfort of a bankable recurring income stream and additional income potential. 10 stocks we like better than Main Street Capital › My ultimate financial goal is to become financially independent. My target is to grow my passive income to the level where it can cover my basic living expenses. That would eliminate the stress of having to work to pay my bills. I'm always on the lookout for new investments that generate passive income. One that I've surprisingly overlooked for years is Main Street Capital (NYSE: MAIN). However, after taking a closer look at the company, I've realized it's an incredible income stock. That's why I now plan to buy shares of the high-yielding monthly dividend stock this June. Main Street Capital is an investment firm that provides debt and equity to lower middle market companies, specifically those with $10 million to $150 million in annual revenue. It also provides debt capital to larger middle-market companies, up to $1 billion in annual revenue. These companies use this capital to support management buyouts, recapitalizations, growth, refinancing, and acquisitions. Main Street provides companies with a "one-stop" financing solution to help meet their funding needs. The company operates as a business development company (BDC). The IRS requires a BDC structured as a regulated investment company, which is Main Street Capital's structure, to distribute at least 90% of its taxable income to shareholders to avoid paying income taxes at the corporate level. That makes these entities similar to real estate investment trusts (REITs) or master limited partnerships (MLPs). Given that requirement, Main Street Capital pays an attractive dividend. It currently pays $0.255 per share each month, or $3.06 annualized. With its share price recently around $58 apiece, the company has a 5.2% dividend yield based on its monthly payment level. In addition to those monthly dividend payments, Main Street Capital has routinely paid supplemental cash dividends to ensure it reaches the 90% required payout level. The company recently declared a $0.30 per share supplemental dividend. If we annualize that rate and add it to the monthly payout, Main Street's yield is over 7%. Given the payout requirements of BDCs and the risks of providing capital to smaller companies, many of these companies don't have good records of paying reliable dividends. Their payouts can rise and fall, sometimes significantly, based on their earnings. What surprised me about Main Street Capital was the company's incredible record of paying monthly dividends. Since coming public in 2008, the company has never suspended or reduced its monthly dividend payment. Instead, it has increased its monthly payment level by 132% during that period. The company will hold its payout flat during recessions for extra wiggle room while growing it when the economy starts expanding again. It has increased its dividend by 2% over the past quarter and 4.1% over the last year. A stable and steadily rising income stream is exactly what I want because it can provide me with bankable income that can grow alongside my expenses. On top of that stable and growing monthly dividend, Main Street Capital routinely declares supplemental dividends. Since its IPO, the company has declared $7.24 per share of supplemental dividends. Add in the company's recurring monthly dividend, and it has paid a total of more than $45 in dividends since coming public. That's over three times its IPO price of $15 per share. The company designed its dividend policy to provide investors with significant comfort through a bankable monthly dividend. The current payment level is well below its distributable net investment income, with $0.75 in monthly dividends paid in the first quarter compared to $1.07 per share of distributable income. That gives it the flexibility to provide investors with additional income by routinely increasing its monthly payout and paying supplemental dividends. Main Street Capital has done an incredible job paying dividends over the years. It pays a very bankable monthly dividend. On top of that, it routinely pays supplemental dividends and increases its monthly payout. That rock-solid recurring income stream and upside potential are why I'm excited to add Main Street Capital to my income portfolio this month. I think it can supply me with a lot of income in the future, which should help me reach my goal of becoming financially independent even faster. Before you buy stock in Main Street Capital, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Main Street Capital wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $649,102!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $882,344!* Now, it's worth noting Stock Advisor's total average return is 996% — a market-crushing outperformance compared to 174% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. 1 Incredible High-Yielding Monthly Dividend Stock I Plan to Buy in June for Passive Income was originally published by The Motley Fool
