Top-Rated Monthly Income Stock On Sale

| June 6, 2022
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In a market like this, share prices are down across the board, and high-quality monthly income stocks become great bargains for investors focused on the long term.

While there are many choices for income investors to grab a great deal on dividend-paying stocks, I like to use these market correction opportunities to pick up shares that might look a little pricey during regular times.

Like this stock…

Business Development Companies (BDCs) are a type of pass-through business structure, meaning that if it pays out at least 90% of net income as dividends, a BDC does not pay corporate income tax.

Congress wrote the BDC rules to provide additional funding sources to small-to-medium-sized corporations. BDCs offer debt and equity capital to companies that need added resources to grow their businesses and are a valuable part of the finance chain that helps small businesses grow.

About 50 BDCs trade on the public stock exchanges. Most are externally managed by large finance companies such as KKR, Ares Capital, and Blue Owl Capital. A minority of BDCs have internal management, which means management goals are more closely tied to investor results. External managers receive hefty management fees that are not always correlated with the returns to investors in the BDC shares.

Main Street Capital (MAIN) is widely viewed as one of the best internally managed BDCs. It pays monthly dividends that have grown steadily since the company’s 2007 IPO. Main Street’s dividend has never been cut; in fact, when profits allow, it pays additional supplemental dividends. The Main Street dividend has grown by 95% since the IPO.Investors love all this dividend goodness. Because of the company’s excellent track record, MAIN shares typically yield much less than the average BDC. For example, before this current stock market decline, MAIN was priced to yield right at 5.0%. At that same time, the VanEck Vectors BDC Income ETF (BIZD) was paying around 8%.

Even with the lower yield, Main Street Capital gives investors superior returns over the long run. Its average annual return for the past ten years comes in at 10.8%, and with dividends reinvested, the compound annual growth rate jumps to 13.3%. Compound growth of a growing dividend is a potent investment strategy.

Currently, MAIN shares are down 22% from their 52-week high. The yield tops 7%. I highly recommend starting a position or adding some shares if you already own MAIN. You will not be disappointed.

And if you want more high-paying, fast-growing BDCs and other income stocks, get access to the list of my favorite ones by clicking here.

This post originally appeared at Investors Alley.

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Category: Dividend Stocks To Buy?

About the Author ()

Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments, and 30 Day Dividends, a specialty income service that takes advantage of opportunities for relatively fast, attractive profits around potential dividend payouts.

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