1 Reason to Buy Main Street Capital (MAIN)

Key Points

• Main Street Capital pays a sustainable monthly dividend.

• The BDC also periodically pays supplemental dividends.

• The company's dividend payments really add up.

• 10 stocks we like better than Main Street Capital ›

There are many reasons to consider buying shares of Main Street Capital (NYSE: MAIN). The main one is the reliable and attractive dividend income it provides to investors.

Here's a closer look at the dividend policy of this business development company (BDC).

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BDCs, much like master limited partnerships (MLPs) and real estate investment trusts (REITs), must distribute 90% of their taxable income to shareholders each year. As a result, these entities tend to pay out lucrative dividends.

Main Street Capital stands out for its unique dividend policy and excellent track record. Unlike most BDCs, which pay dividends quarterly, MAIN pays monthly dividends. It sets its monthly dividend at a sustainable level to provide investors with comfort knowing they'll receive consistent income. The company has never cut or suspended its dividend and has increased its monthly payout by 132% since 2007. Over the past year, Main Street has raised its monthly dividend twice by a total of 4.1%.

Additionally, Main Street Capital periodically pays supplemental dividends, typically on a quarterly basis. These payments enable the company to meet the 90% distribution requirement and provide investors with additional income. While the company doesn't always make a supplemental dividend payment, it has paid one every quarter since the end of 2021.

Main Street Capital has declared a total of $1.065 per share in dividends for the third quarter ($0.765 in monthly payments and a $0.30 per share supplemental payment). Those payments give the company an annualized dividend yield of around 8%, several times higher than the S&P 500 (sub-1.5% dividend yield).

With sustainable and growing monthly dividends and periodic supplemental income, Main Street Capital is a great stock to buy if you're seeking passive income.

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Matt DiLallo has positions in Main Street Capital. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.