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High Yields in Finance

05/22/2014 8:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

We recommend that investors focus on high-dividend-paying growth stocks and funds, explains Mark Skousen; here, the editor of Forecasts & Strategies looks at two plays in finance—a private equity fund and a business development company.

PowerShares Global Listed Private Equity Fund (PSP)—currently yielding over 13%—is expected to pay another high dividend soon. Currently, the fund has 64 holdings, 40% of them in the United States, 18% in the United Kingdom, and 9% in France.

As an ETF, it pays distributions from limited partnerships that have substantial profits going back to investments made in the early 2000s. The payouts may last for several more years.

This is a great way for investors to participate in a strategy that was once reserved for the ultra-rich and institutional investors. Private equity funds specialize in buying and selling public and private companies, buyouts, and initial public offerings (IPOs).

Private equity funds also are estimated to have returned $120 billion to investors last year, beating 2012’s record by $5 billion. More than $143 billion was invested in this sector, the most since 2008.

Main Street Capital (MAIN), a business development company (BDC) that engages in debt and equity financing of small family-owned businesses, announced a sharp increase in its semi-annual dividend of 27.5 cents per share, to be paid in mid-June. That’s a 38% increase from its semi-annual dividend paid in June 2013.

Main Street decided last year to pay an extra dividend twice a year. At the current rate, counting its monthly dividend of 16.5 cents a share, MAIN's annual total distribution should be $2.53 or more, for an outstanding yield of 7.8%.

Prior to this announcement, the investment company announced a secondary offering; new offerings in BDCs are common every couple of years and always cause the stock to sell off, offering a bargain buying opportunity.

Main Street sells for only 1.4 times book value now, while returning nearly 15% on its portfolio. Now is the time to add more shares to your portfolio.

I agree with Wall Street analysts who consider Main Street Capital the “best dividend stock in America,” due to its top management team, insider buying, and rising dividend policy. It’s one of my largest positions.

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