A Venture Firm on Its Game

09/03/2012 10:30 am EST

Focus: DIVIDEND

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Venture capital firms have been coming back out of the woods recently, and this one has great prospects...and kicks off a healthy yield as well, notes Mark Skousen of Forecasts & Strategies.

The economy and the stock market are showing some life, but until the November elections are completed and Europe resolves its debt crisis, uncertainty and volatility will abound.

For now, investors should focus primarily on income investments, especially stocks like Main Street Capital (MAIN).

Main Street, yielding 7%, is a Houston-based venture capital firm that provides loans, equity, buyouts, recapitalizations, and growth financings to private firms. MAIN started out slowly, but it now is ahead 13%, after recently announcing a fourth increase in dividends this year.

Its monthly dividend started the year at 13.5 cents a share. Management then raised it to 14 cents in February, 14.5 cents in June, and starting in October will pay 15 cents. That means an annual yield of 6.7%—but don’t forget that management stated it will pay an additional 25-cent special dividend at year-end. Consequently, the total dividend yield is actually 7.7% per year.

There’s no better indicator of success than a consistently rising dividend policy. In Main Street’s case, its net asset value (NAV) rose to $16.89, up more than 11% from last year. Net investment income rose 33% to $13.4 million (or 49 cents per share). So its management can justify a higher dividend payout.

In short, Main Street Capital is a gold-medal money machine that pays high regular monthly income. No wonder insiders are buying the stock. You should, too.

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