Main Street Capital Corporation Now Pays 7%
I usually avoid high-yield stocks, and for good reason.
Each day, I screen the market for new investment ideas. And
with a few mouse clicks, you can pull up dozens of high-yield securities. Right
now, for instance, 120 stocks now pay out more than 10%.
Those yields might sound great, until you look at the
companies behind them; they’re mostly junk. The companies behind these
high-yield stocks often fail to generate enough cash to cover their distributions.
In most cases, it’s only a matter of time before the payout gets slashed.
That said, sometimes you do find exceptions. Over the years,
I’ve found pockets of safe high-yield stocks buried in the trash. You just need
to shift through a lot of rubbage. And recently, I found one of these “pockets”
in the lending business: Main Street Capital Corporation (NYSE:MAIN).
Main Street’s business model is pretty straightforward to
wrap your head around: the company lends money to other businesses and collects
interest payments. The profit comes from the spread between the yield earned on
these loans and its cost of capital.
No comments:
Post a Comment