Monthly Income from Main Street Capital

Main Street Capital (MAIN) is a business development company that pays a monthly dividend.  It currently has a dividend yield of 8.52% by paying a $0.13 dividend per month.  MAIN has a market cap of $350 million.  There is room for significant growth as MAIN offers more financing to companys between $10-100 million.  The ROE is 20.7% for this stock.

MAIN just completed a successful common stock offering with net proceeds of $70.5 million.  This money will be used to repay outstanding debt borrowed under its $100 million credit facility, to make investments in accordance with its investment objective and strategies, to make investments in marketable securities and idle funds investments, which may include investments in intermediate term bank debt, rated debt securities and other income producing investments, to pay operating expenses and other cash obligations and for general corporate purposes.

MAIN has a trailing PE of 7.63 which is cheap for a monthly dividend with a small capitalization.  MAIN’s PE ratio is among the lowest of any stock in the Investment Services industry and signals that investors have not been willing to pay a premium for this company’s business prospects. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.

MAIN business summary:

Main Street Capital Corporation (MSCC) is a principal investment firm focused on providing customized financing solutions to lower middle-market companies with annual revenues between $10 million and $100 million. The Company was formed for the purpose of acquiring 100% of the equity interests of Main Street Mezzanine Fund, LP (MSMF) and its general partner, Main Street Mezzanine Management, LLC (MSMF GP); acquiring 100% of the equity interests of Main Street Capital Partners, LLC (the Investment Manager); raising capital in an initial public offering (IPO), which was completed in October 2007, and thereafter operating as an internally managed business development company (BDC). MSMF is licensed as a Small Business Investment Company (SBIC) by the United States Small Business Administration (SBA) and the Investment Manager acts as MSMF’s manager and investment adviser. The Company invests primarily in secured debt instruments, equity investments, warrants and other securities.

On 3/10/2011, MAIN reported 4th quarter 2010 earnings of $0.19 per share. This result missed the $0.27 consensus expectations of the 4 analysts following the company and missed last year’s 4th quarter results by 17.39%.  The next earnings announcement is expected on 05/02/2011.  However, Q1 2011 earnings are expected to $0.34 per share.  For the year, earnings are expected to be above the dividend payout which lessens the chance of a dividend cut.  MAIN has a 5-year sales growth rate of 37%

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