This Is The Single Best Stock For A Safe And Consistent High-Yield Income

I regularly review a large number of high yield stocks. I try to dig out the details that separate a high-quality company from one that has the potential to truly whack investor wealth. I often talk about how tremendous value can be found in the dark corners of the stock market, where the investing public doesn’t understand how these undiscovered nuggets of dividend paying companies operate. But sometimes I realize I need to go back and discuss a stock that should be core holdings for almost every stock market investor.

We can all learn some lessons from an overview of how Main Street Capital Corporation (NYSE:MAIN) operates and pays investors. MAIN is a business development company (BDC) a class of stocks that operate under special laws and tax rules that require them to provide financing to small and mid-size corporations. There are about 40 publicly traded BDCs, ranging from market caps measured in tens of millions up to Ares Capital Corporation (NASDAQ:ARCC) with almost $5 billion of market value. Overall, I think the BDC space carries a lot of risk, primarily driven by the restrictions government rules put on the business type, and only about one-tenth of the stocks in the group offer acceptable investment risk. Out of this small subset, Main Street Capital stands well above the rest as a company that has developed a very strong business model inside of the BDC rules.

A BDC can make either debt (loans) or equity (buying shares) investments in its client companies. Most BDCs focus on the debt side, make high interest rate business loans with cash for BDC dividends coming from the interest rate spread a BDC earns. Main Street Capital makes plenty of loans, but it also puts a significant amount of capital into equity investments. These investments allow MAIN to participate directly in the growth of its client companies. The two tier model has worked very well for Main Street Capital, with the strongest evidence coming from MAIN’s dividend payment record.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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