Is Main Street Capital Stock a Buy, Sell, or Hold With Shares 15% Below Their 52-Week High?
Main Street Capital offers an attractive, well-supported yield, and the drawdown has made the valuation look reasonable again.
Overview
Main Street Capital (NYSE: MAIN) is a business development company (BDC). It has to distribute at least 90% of its taxable earnings to shareholders to avoid corporate-level taxation, much like a real estate investment trust. Like other BDCs, it tends to have a very attractive yield. But Main Street Capital is a fairly conservative business, which changes the equation greatly for dividend investors. Here's why the roughly 15% pullback from the stock's 52-week high, as of this writing, could make it a buy for conservative investors.
To keep things simple, BDCs like Main Street Capital sell stock and issue debt, using the proceeds to make loans to smaller companies. Generally speaking, the companies to which BDCs provide loans don't have more attractive options, such as issuing stock or debt on public markets. And bank loans are either not available or would come with too high an interest rate. This allows Main Street Capital to charge very high interest rates for its loans.
Image source: Getty Images.
Details
Source
Originally published at www.fool.com.