Skousen Steps up Financials

01/04/2016 7:00 am EST

Focus: STOCKS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

The Fed has finally raised the discount rate, giving investors some confidence that the economy is in better shape. The Fed is determined to increase price inflation, which means it will continue to stimulate the economy, argues Mark Skousen, editor of Forecasts & Strategies.

I recommend staying invested and adding to your positions in high dividend-paying financial growth stocks, such as these two portfolio holdings.

BB&T (BBT)

BB&T bank, the rapidly expanding bank of the South, rallied last month and was profitable for the year. It has consistently beaten Street estimates on earnings and revenues.

With the recent acquisition of Susquehanna Bank and other regional banks, BB&T now has more than $200 billion in assets.

Several analysts expect BB&T to outperform the markets in 2016. Earnings are strong, growth is healthy, costs and non-performing assets are low and the bank’s risk profile is better than that of its peers.

It has a rising dividend and stock repurchase program, both bullish indicators. It is aggressively expanding into the Northeast and the Midwest and eventually may become a nationwide bank.

Main Street Capital (MAIN)

Business development companies—or BDCs—such as Main Street have declined because some of their investments are tied to the slumping oil & gas sector.

Around 17% of Main Street Capital’s investments are energy-related, although so far only a tiny percentage of its investments are in trouble.

I don’t believe Main Street’s fundamentals are going to be hurt by the oil crisis, but investors can be fickle and sell indiscriminately. Such sell-offs should be seen as buying opportunities.

MAIN raised its monthly dividend three times—from 17 to 18 cents a share—and paid two additional dividends in July and December (27.5 cents each). MAIN now yields 7.1%.

It improved its profit margins to 74%, saw the S&P raise its bond rating to BBB (investment grade), and witnessed its first $100 million profit.

Its operating-expenses-to-assets ratio was reported at 1.3%, the lowest in the industry.

Main Street was one of only a few BDCs to enjoy a profitable year in 2015. It is the envy of the sector and investors are paying a premium for it. The future looks bright for Main Street.

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