For income investors, monthly
payers are the
. We depend on regular distributions to help with bills... and
having to wait three months for our next payment isn't always
Luckily, there are a lot of solid monthly payers to choose from.
One of my favorites right now is
Main Street Capital (
. MAIN is a
business development company (
, which means it loans money to small, fast-growing private
companies for interest and an equity stake. If a company in its
loan portfolio gets bought out or goes public, MAIN gets a piece of
By law, BDCs have to pay out 90% of their taxable income to their
shareholders, making them an
custom-made for income investors. There are roughly two dozen BDCs
that trade on major stock exchanges and only a handful pay
Since I reinvest my dividends for my
advisory, I prefer monthly payers. I can compound my growth
slightly faster with more frequent dividend payers. And by
reinvesting in incremental
more frequently, I minimize my
-- since I'm reinvesting three times a quarter instead of once, I
have less chance of reinvesting all my dividends into a
I've owned MAIN in my
portfolio since February 2010. Since that time, the company has
increased its dividend four times. Right now MAIN pays a monthly
dividend of $0.145 per share. At current prices, that gives a
of roughly 7.5%. Better yet, including dividends, MAIN has returned
99.5% based on my initial investment.
That doesn'tmean I think investors are late to the party. I
particularly like MAIN now because the kinds of companies it
invests in are, for the most part, domestically focused. And while
isn't growing like gangbusters, it is far more stable than other
world economies right now. I also believe that the recently signed
Jumpstart Our Business Startups (
) Act will benefit businesses like MAIN. The new law makes it much
easier for small companies to go public, making it more likely that
MAIN and other BDCs will
from their equity positions.
Risks to Consider:
BDCs such as MAIN can be volatile. Given current market
conditions, conservative investors may want to wait for a more
stable environment before investing. There is certainly no harm in
maintaining a comfortable cash position.
Action to Take -->
Risk tolerant investors, however, can use this volatility to their
advantage by placing a
2% below the
to try to catch MAIN on a dip. After all, when you can lock in a
lower price, you lock in a higher yield.
Amy's portfolio holds up in down markets. Take the sell-off last
year. In the month of August alone, the S&P 500 lost 5.3%.
Despite all the turmoil, Amy's
portfolio fell just 1.0% during the month. To learn more about
Amy's strategy -- including a few more high-yield picks she likes
you can visit this link to read more
-- Amy Calistri
Amy Calistri does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of MAIN in one or more if its "real money" portfolios.
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