This High-Yield Dividend Stock Has Raised Its Payout for Over a Decade

In these uncertain times, more investors are seeking out stable companies that consistently pay high dividend yields year after year. Thatʻs not always easy to find in one stock, because high yields often mean the stock price has dropped since the yield is how much dividend income the stock pays annually in relation to the stock price.

If the stock price drops, the yield will go up if the company maintains or raises the dividend. A high yield is great, but if itʻs because the stock is dropping, it may signal broader issues, and it could be a red flag that the company will have trouble maintaining its dividend level.

So, when you find a high-yield dividend stock that reliably increases its payout every year, thatʻs a pretty good thing. You can find that in Main Street Capital (NYSE: MAIN).

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18 years of dividend raises

Letʻs get right to the point: Main Street Capital has a ridiculously high dividend yield of 5.9%, which is about five times higher than the average yield on the S&P 500. Further, its five-year average dividend yield is 6.2%, so its yield has consistently been high. It has also increased that dividend for 18 years in a row and counting.

There are very few dividend stocks that offer that high a yield and have raised their dividend for that many years.

Main Street Capital also has the distinction of paying out its dividend monthly as opposed to quarterly. So investors will get those payouts 12 times a year, as opposed to four.

There are a few major reasons that Main Street capitalʻs dividend is so strong. For starters, it is a business development company (BDC), which is mandated by federal law to pay out 90% of annual taxable income in dividends in exchange for certain tax breaks. So, quite literally, BDCs are built to provide dividends.

However, while BDCs typically pay out high yields, the dividends are often subject to trends in their industries or macroeconomics. Thatʻs because BDCs are companies that provide small- and mid-sized businesses with funding either through loans, debt financing, or private equity. Its customers are typically companies that canʻt get loans or funding from traditional banks, so they take on more risk, which can create volatile returns and dividends.

Main Street Capital offers some advantages

Main Street Capital has been able to manage the volatility better than most BDCs for a few reasons. One of its major advantages is its internal management, while most other BDCs are managed by third-party companies.

So, with its own staff running the company, Main Street Capital doesn't pay third-party fees. Over time, it has been able to keep expenses lower through economies of scale. In addition, the efficiency that comes from being internally managed allows the company to be more selective in its underwriting and investments and think longer term. Unlike many BDCs, it takes equity ownership in many of its companies, which offers longer-term benefits. Further, the structure aligns the company more directly with its shareholders.

These factors have all made Main Street Capital one of the most reliable high-yield dividend stocks you can get.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.