Today, wanted to write a little about Main Street Capital, Ticker symbol is MAIN. Beloved by many dividend investors and other fixed income investors.
They coin themselves as the “Main Street” and not Wall Street, when it comes to providing liquidity, investment and debt financing.
Why do dividend investors love this stock? Is it because they pay a MONTHLY dividend?
Let’s dive in and see if MAIN should be a MAIN part of your dividend stock portfolio!
Main Street Capital (MAIN) – The Business
Headquartered in Houston, Texas, MAIN has helped over 200 different companies in their business journey.
What exactly do they do and how have they helped?
Main Street is a one-stop shop for entrepreneurs for small and middle staged companies. They can provide debt financing, i.e. offering cash in return of possible interest income and/or convertible debt to equity, in order for those companies to grow and prosper.
What they also tout as being different is they do not clear out management. They allow management to run the business, but act as a strategic partner to help guide to either higher performance or to full exit/sale of the business.
While owning companies or providing strictly debt financing arrangements, they received dividend income, interest income, returns of capital on their investment, etc…
This is then distributable income to their shareholders, which is what MAIN is really good at doing! We will get to more of that later.
Main Street has performed decently well during a volatile market in 2023. Lagging the market slightly.
In Main’s latest press release, Main earned $128 million in revenue from interest, fee and dividend income. This was also up over $40 million from last year’s linked quarter, a 50%+ growth.
Interest expense, of course, is higher for them too, due to their borrowing from facilities to provide the debt and capital financing needed by their clients. Interest expense was also up 55% from last year.
Net income was also impressive vs. last year.
Therefore, it appears MAIN is brushing off their shoulders in 2023, as they continue to have strong earnings results, despite the economic head winds, record high interest rates and the Fed possibly still planning for more.
Let’s look at Main Street Capital (MAIN) through the dividend diplomat stock metrics!
MAIN dividend stock metrics
Main Street, you are going through the Dividend Diplomat Stock Screener! Here, we focus on 3 main dividend stock metrics:
1.) Price to Earnings Ratio (P/E): We look for the price to earnings ratio < the S&P 500 and the competition.
2.) Dividend Payout Ratio: The preferred dividend payout ratio is < 60%. In fact, we believe the perfect payout ratio is between 40% and 60%.
3.) Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the 5 year dividend growth rate. In addition, we review how many years the company has increased their dividend.
1.) P/E Ratio: A very low p/e ratio for MAIN, below 10x expected earnings. Fairly inexpensive at the moment.
2.) Dividend Payout Ratio: I expect MAIN to pay a handsome amount back to shareholders. That’s the point of their business model is returning as much of their earnings back to shareholders. A dividend payout ratio, not including special dividends that they do, is 69%, based on a $0.235 dividend payout each month. Yes, remember – they pay MONTHLY!
3.) Dividend Growth Rate: Over the last 11 years, they have always paid a dividend and you can see below the trajectory is up. During COVID, there was a prudent pause to their dividend with no increase. Therefore, they’ve grown the dividend technically 2 years at over 4%.
Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for Main Street is now at 6.98%, holy smokes! Higher risk? Higher reward?
Is main a stock to buy now?
Now that we’ve gone through the metrics, is Main Street a stock to buy for the dividend stock portfolio?
I am intrigued by Main Street, to say the least. I own over 60+ individual stocks and adding a new one to my portfolio isn’t up my alley, but if I can shed 2-3 stocks that I don’t see as a fit for me, I can see replacing them with Main Street Capital. Or having MAIN as a small piece of the pie as one would near financial freedom, to pack a monthly dividend punch to your passive income total.
If you head over to our YouTube channel, you’ll find other undervalued dividend growth stocks that are higher on my list for stocks to buy now!
How about you? Do you own Main Street stock? Are you finding it hard to find an undervalued stock, as the stock market has been bump has heck lately? Share your comments and feedback below!
As always, thanks for stopping by, good luck and happy investing!
-Lanny