My favorite income stock has just issued new shares; the recent sell-off has created a great buying opportunity, reports Mark Skousen, editor of Forecasts & Strategies.
At the recent San Francisco Money Show, I told subscribers and attendees about my favorite money machine on Wall Street: Main Street Capital (MAIN).
The Houston-based venture capital firm has three things going for it: a rising dividend policy, a monthly payout schedule, and two special dividends, paid every January and July.
The company paid a total of $1.79 in dividends in 2013. When you count the additional three dividends it will pay out through December, it amounts to a 7.8% yield at the current price.
Main Street will increase its monthly dividend to 16 cents per share in the next three months, a 7% increase over its monthly dividend yield a year ago.
Since we started recommending MAIN, it has increased its dividend four times, in addition to its new special dividend policy.
Net investment income has been growing so fast (30% a year) that MAIN also announced a $4 million secondary stock offering at $29.75 a share.
Investors typically see a new stock offering as a dilution of shares (in this case, 11% of outstanding shares) and knock the stock down. That's exactly what happened, as the price fell from $31 to $29 last week.
After the sell-off, prices usually recover, so this situation is a buying opportunity. I noticed that ten insiders, including CEO Vince Foster, bought shares last month, before the announcement. So they must not be too concerned.
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