August 9, 2019

Main Street Capital Corporation: Finally, A Safe High-Yield Stock


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.



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