Main Street Capital Holdings (NYSE:MAIN)

CAPS Rating: 4 out of 5

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Member Avatar 1elk (31.12) Submitted: 10/15/2014 2:23:37 PM : Outperform Start Price: $26.93 MAIN Score: +8.32

like dividends that grow and stable

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Member Avatar RCNYC (< 20) Submitted: 5/6/2014 12:49:19 PM : Outperform Start Price: $29.65 MAIN Score: -0.15

great monthly dividend, solid business model

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Member Avatar capemaygoodie (30.41) Submitted: 3/30/2014 3:35:00 PM : Outperform Start Price: $31.70 MAIN Score: -7.03

I just liked the dividend

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Member Avatar MKArch (99.69) Submitted: 3/13/2014 4:44:37 PM : Outperform Start Price: $32.54 MAIN Score: -10.35

This idea comes from the S.A. article linked below. I cut and pasted key points with a brief thought of my own at the end.

http://seekingalpha.com/article/2075523-main-street-capital-the-best-dividend-stock-in-america?source=email_authors_alerts&ifp=0

From the beginning of his tenure, CEO Vincent Foster has been buying shares of Main Street. In fact today. Mr. Foster is the single largest shareholder of Main Street Capital. He owns over 1.4 million sharesof the company worth $39.25 million. In fact, management owns 9% of Main Street's shares. Unlike many management teams who obtain free or reduced price shares through generous stock option grants, Main Street's management buy all its shares at market prices.

Since IPOing in 2007, Main Street has increased its dividend from $.33/quarter to $.495/quarter which is an increase of 50%. This represents an 8.5% compound annual growth rate, CAGR. This is the fastest dividend growth rate of any BDC.

In the last 6 years not only has the dividend grown at 8.5% CAGR but the NAV has grown at 9.1% CAGR.

In the last 5 years Main Street Capital has returned CAGR of 18.1% in share price appreciation alone. Add in dividend reinvestment and that growth rate climbs to an astonishing 28.84%. This makes Main Street Capital one of the greatest investments of the last 5 years. Valuing BDCs is both easier and more difficult than most companies. Traditional metrics such as EPS and PE ratios don't matter as much as does NAV, NII/share and price/NAV. The 5 year average price/NAV is 1.53, indicating that the current share price is 13.1% overvalued.

However, another way to value a BDC is by adding the yield and the CAGR of the dividend together. This is an estimate for total returns since the dividend yield is what drives the price of BDCs. In this case we have a yield of 5.6-7.3% (depending on whether one includes the semiannual special dividends) and a dividend growth rate of 8.5%. This indicates that investors could expect to earn total returns of 14.1%-15.8% CAGR going forward. Taking into account dividend reinvestment we get anticipated future returns of 20.5-24.25

All I have to add is per the last couple of points above MAIN is not cheap based on traditional metrics for valuing a BDC and as they say "past performance is no guarantee of future results". It's possible the tremendous success of the past half decade is unsustainable for some reason. Maybe the financial crisis created opportunities that won't exist going forward or they just lucky or took big risks that didn't bite them "this time". I don't think so, but it's a possibility and this would be the downside IMO. On the flip side a point the author made that I could'nt find a convenient enough sound bite for, was that the premium share price is actually a benefit as they regulary raise cash to fund investments and raising cash at a signficant premium to NAV is very shareholder friendly.

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Member Avatar TMFValueMagnet (91.61) Submitted: 11/18/2013 10:03:10 AM : Outperform Start Price: $28.99 MAIN Score: -1.80

Buying a financier at a serious premium to book value is usually a questionable decision. However, thinking in terms of 5-10 years, Main Street Capital can outperform.

First, it has a shareholder-friendly setup that gives it the lowest operating costs of the BDCs I watch. All else equal, lower expenses beget higher returns. http://www.fool.com/investing/general/2013/09/27/main-street-capital-corporations-massive-competiti.aspx

It also has the best median credit quality, given that it is invested heavily in lower middle-market secured debt. http://www.fool.com/investing/general/2013/10/31/main-street-capital-the-buy-and-hold-bdc.aspx

Finally, management is heavily invested alongside public shareholders. http://www.fool.com/investing/general/2013/11/17/do-your-investment-managers-eat-their-own-cooking.aspx

I'm banking on above-average returns on equity to erode the book value premium over time. Additional equity issuance at prices above book value will be good for existing shareholders. The dividends will bring down the cost basis over time here on CAPS, juicing total returns.

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Member Avatar BaseBawl (< 20) Submitted: 10/29/2013 8:31:17 AM : Outperform Start Price: $28.42 MAIN Score: -1.73

at least 8% growth and 3% yield.

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Member Avatar drblanton (54.51) Submitted: 8/9/2013 4:26:24 AM : Outperform Start Price: $28.02 MAIN Score: -4.74

On my list of companies to watch. I've never invested in a capital holding company. This would be a new experience.

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Member Avatar iamflactradex (31.14) Submitted: 7/9/2013 12:57:11 PM : Underperform Start Price: $25.99 MAIN Score: -0.79

Slow...

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Member Avatar Herbstmd (53.26) Submitted: 6/28/2013 4:57:27 PM : Outperform Start Price: $24.72 MAIN Score: +4.01

Solid company, good dividend

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Member Avatar jdavis4982 (38.70) Submitted: 4/24/2013 9:30:46 PM : Outperform Start Price: $26.38 MAIN Score: -6.08

Just collecting dividends...

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Member Avatar financialdoctor1 (< 20) Submitted: 1/23/2013 11:54:33 PM : Outperform Start Price: $27.90 MAIN Score: -19.97

Main is a undervalued company with great earnings and outlook on the economy.

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Member Avatar 2trpop (94.42) Submitted: 1/4/2013 2:30:27 PM : Outperform Start Price: $26.91 MAIN Score: -18.54

Monthly Div (Follow)

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Member Avatar Eudemonic (64.15) Submitted: 11/15/2012 9:18:40 AM : Outperform Start Price: $23.34 MAIN Score: -11.08

NASDAQ stock screener: small cap growth

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Member Avatar foralia1 (< 20) Submitted: 10/27/2012 4:27:19 AM : Outperform Start Price: $25.40 MAIN Score: -15.92

Consistent div. I finally picked some up.

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Member Avatar jaybird43 (37.97) Submitted: 10/17/2012 2:59:02 PM : Outperform Start Price: $25.43 MAIN Score: -11.98

First thing I look at is the debt/equity ratio and Main's is good. Low beta, and low p/e. And a monthly dividend of 6.0 isn't hard to take either

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Member Avatar superseeker13 (< 20) Submitted: 9/22/2012 7:31:58 AM : Underperform Start Price: $25.05 MAIN Score: +11.04

The market changes so the out come of the next few weeks will lower ased on there recent sucess.

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Member Avatar SnarkyApple (51.88) Submitted: 9/14/2012 2:53:58 PM : Underperform Start Price: $24.35 MAIN Score: +5.53

I'm too hipster for this stock. Only controversial companies can defy gravity.

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Member Avatar 2008Rehab (< 20) Submitted: 9/8/2012 8:58:28 AM : Outperform Start Price: $23.45 MAIN Score: -3.55

They sell lots of cars and trucks, and everybody needs cars and trucks.

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Member Avatar drbat (67.18) Submitted: 8/2/2012 7:10:46 AM : Outperform Start Price: $20.80 MAIN Score: +5.68

MAIN has consistently increased it's revenues, net investment income per share, as well as dividends that are fully covered by income.

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Member Avatar ihaveabaddober (38.44) Submitted: 6/26/2012 7:51:54 PM : Outperform Start Price: $19.57 MAIN Score: +10.56

I have no idea what this company does besides offer a monster dividend and excellent profitability ratios...

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