Real estate, REITs, dividend stocks, you name it. I’m always looking for new ways to make my money work while I sleep. And one stock I found that’s super interesting for passive income is Main Street Capital (NASDAQ: MAIN).
It has the hallmarks of being one of the best passive income machines I’ve seen, and you’re about to see why.
Key Points
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MAIN delivers reliable high-yield income, with monthly and supplemental dividends backed by a 12.4% average loan yield and equity upside.
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Internally managed and disciplined, MAIN has never cut its dividend and outperforms most BDCs.
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Ideal for passive income goals, MAIN helps fund essential expenses with consistent, growing payouts.
What Main Street Capital Actually Does
Main Street Capital isn’t your typical dividend stock. It’s a business development company, which means its whole mission is to provide capital to small and mid-sized businesses, specifically those in the $10 million to $150 million revenue range. Think of it as a private equity firm for the underdogs of the corporate world.
But it’s not just equity. MAIN also extends loans, secured, floating-rate ones that generate serious yield.
The company is incredibly strategic in how it structures deals, targeting three outcomes to protect investor capital, lock in consistent income, and create the potential for capital appreciation.
What most people don’t realize is Main Street has its own internal investment team that actually sources, underwrites, and manages these deals. That’s rare.
Most BDCs outsource the work or rely on external advisors. MAIN’s hands-on approach lets it cherry-pick deals and avoid the type of over-leveraged landmines that have sunk other firms in this space.
The Secret Sauce Is High Yields & Ironclad Discipline
Right now, MAIN’s debt portfolio boasts a weighted average cash coupon of 12.4%. That’s not a typo. In a world where most savings accounts pay under 5%, that number is eye-popping. This interest income is the lifeblood of its monthly dividends.
But there’s another layer, which is equity stakes. Almost two thirds of the companies MAIN invests in also pay dividends, which means MAIN earns extra income on top of the loan interest. And when these equity holdings increase in value, it’s a double win, rising net asset value plus the potential to monetize gains.
The cherry on top? MAIN has never cut its dividend. Not once. Since going public in 2007, the payout has either held steady or increased every single month. That’s no small feat when you consider that nearly 4 out of 5 of BDCs have cut dividends at some point.
And here’s an unusual but powerful twist, which is Main Street pays a supplemental dividend in addition to its base monthly payout. For the past year and a half, shareholders have received an extra $0.30 per quarter, on top of a $0.255 per month base. That adds up to a juicy $1.065 per quarter, or an 8% annualized yield at current prices.
These supplemental payments aren’t guaranteed, of course. They fluctuate with earnings and market conditions. But the fact that MAIN has been so consistent with them, even through challenging periods, speaks volumes about the health of its portfolio.
Why I’m Excited About This Dividend Workhorse
Income investors want dividend payers they can count on, not just for this year, but for the next decade. MAIN fits that mold. Between its high base yield, supplemental dividends, and disciplined underwriting, it checks every box.
It also helps that the company is internally managed, another underappreciated detail. Unlike externally managed BDCs, which often have bloated fee structures that favor the managers over the shareholders, Main Street’s setup is lean. That means more profits stay in-house, flowing back to investors.
One stat that really sealed the deal for me is MAIN has grown its monthly dividend by 132% since late 2007.
In a world that feels more uncertain by the day, that kind of dependability is worth its weight in gold.