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Main Street Capital: A High-Yield Monthly Paying Blue Chip You Can Trust

Published Sat, 27 Jul 2019 10:00:01 -0400 on Seeking Alpha

This article was co-produced with Dividend Sensei.
It’s been a rough decade for income investors, who have faced the lowest interest rates in history.

This has fueled a dangerous rise in “yield chasing” with income seekers going further out on the risk spectrum and buying things like high-yield (junk bond) debt, REITs, utilities, BDCs, MLPs, and dividend stocks in general (so-called “bond alternatives”).
It’s important to remember that while quality names can be found in all sectors/industries and asset classes, preservation of capital and proper asset allocation are crucial to long-term success.
After all, you can’t exponentially compound income and wealth over time if you end up buying too many low-quality yield traps, whose payouts might not be safe even in good economic times, much less during a recession.
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Business development companies, or BDCs, have been attracting a lot of interest from income investors thanks to their pass-through structure and yield focus. Some BDCs offer tantalizing yields of 10% or more, but before you invest in any of them you have to understand the nature of this industry.
BDCs were created by the 1980 Small Business Incentive Act that was meant to help finance over 375,000 small to medium-sized (and generally sub-investment-grade) companies that generate about 33% of US GDP. Banks have typically shied away from such firms, especially after Dodd-Frank enacted much tighter capital/risk... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
ARES CAPITAL 19.19   10.5 1.82 1.60 8.39
JOHNSON & JOHNSON 130.43   21.6 6.03 3.80 2.93