Main Street: A Money-Making Machine

06/05/2015 8:00 am EST

Focus: STOCKS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

In my recent keynote address at the Las Vegas MoneyShow, I suggested the best strategy is to invest in quality companies that pay high and rising dividends, explains Mark Skousen, editor of Forecasts & Strategies.

I highlighted Main Street Capital (MAIN), the Houston-based business development company that finances small family-owned businesses.

Throughout my appearances, I asked my subscribers to identify themselves in the audience and inquired if any of them had lost money by going long in MAIN. Not a single hand went up.

How could they? Here’s a stock that pays a monthly dividend of 17.5 cents a share and has increased its dividend three times in the past year. It also pays out an extra dividend twice a year. When you include the extra dividends, the yield is actually more than 8%.

Not surprisingly, the stock is up 10% this year. So this is an excellent example of growth and income.

Here’s an interesting fact. Since going public in 2007, MAIN has delivered the best returns to shareholders among business development companies (BDCs).

Those who bought at the initial public offering (IPO) price have enjoyed a doubling of their stock value. By the third quarter of 2015, they’ll have received more in dividends, $15.06 per share, than the $15 IPO price.

Amazing. Main Street typically invests in both the debt and equity of these businesses, so the company has an interest in rising valuations for smaller companies.

MAIN, on average, is a 36% equity holder of these private companies and is seeking an opportunity to take advantage of long-term capital gains.

One of the few risks in Main Street is that as a Houston-based investor, the company has a large position in energy-related stocks. It holds 8.5% of its portfolio in energy service businesses.

If oil prices fall further, MAIN could be affected. But I’m not too worried, especially with oil back up to $60 a barrel.

MAIN will pay out a special dividend of 27.5 cents a share to shareholders of record on June 25 (the ex-dividend date is June 16).

If MAIN pays another 27.5 cents in December (its second semi-annual extra dividend), the annualized yield will be 8.5%. MAIN is a money-making machine, ideal for those who need high monthly income.

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