Best Monthly Dividend Stock | MAIN vs GAIN | BDC Analysis & Tutorial Part 1
Stock Investment Analysis Stock Investment Analysis
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 Published On Sep 20, 2020

I want to give a special thanks to my amazing channel members Chester Bean, Clownan Around, Antonio Cagalj, Phui Hong Kok, Juan Ramos, Sara Kim, James Anderson, Peter Brown, Steve Baldwin, and Angie Molini. Your support means so much to me.

Welcome to another Stock Investment Analysis video. Today’s video is Part 1 in my two-part BDC investing series. In today’s video, I am providing a tutorial on BDCs or Business Development Companies. I will also begin my analysis of three BDCs I currently have in my portfolio. The BDCs we will analyze today are Main Street Capital Corporation, ticker MAIN; Gladstone Investment Corporation, ticker GAIN; and Ares Capital Corporation; ticker ARCC. Two of these, MAIN and GAIN pay a monthly dividend and have also paid special dividends. In this video, I will explain to you what a Business Development Company or BDC is, a summary of how to analyze one, and a comparison of MAIN, GAIN, and Ares looking at dividends and price performance as well as NAV, NII, the non-accrual ratio, and weighed average portfolio yield. If you have no idea what one or more of those things are, then you’re in luck because we will be discussing all of this in today’s video. In my next installment of BDC investing coming soon, I will go further into each of these companies, their specific portfolios, their diversification, their historical returns, their valuation, and which I plan to sell and which I plan to buy. I will also discuss the pros and cons for the sector right now and what I will be watching in terms of the economy as I move forward with my investments in BDCs. Make sure you subscribe so you don’t miss Part 2 of my BDC series, and hit the like button because this video took me an enormous amount of time to create.

First, let’s discuss what a Business Development Company is. In the United States, there are approximately 200,000 private businesses which are considered to be in the middle market loan market. These companies in the middle market are not large enough to receive large bank loans which banks regularly give out. Unfortunately for them, they are also too large to receive small business loans. So where do they go? BDCs. Investor’s capital is combined in the BDC which then invests the money in private American companies, obtaining interest and equity in exchange for the capital investment. The private American companies pay the BDC in earnings, interest payments, and/or dividends. The BDC then returns at least 90% of the taxable income to its shareholders.

BDCs can avoid paying corporate taxes if they distribute 90% of their taxable income in dividends. That means that, like REITs like Realty Income and like MLPs like Energy Transfer, BDCs tend to pay high dividends. The great thing about that 90% requirement is that all three of our BDCs, MAIN, GAIN, and ARCC often offer special dividends. Because MAIN and GAIN already pay monthly and both typically pay two special dividends per year, I have received 14 dividends from each company annually for several years prior to this year. That’s 28 dividend payments per year from just two companies!

Now before I start analyzing Ares, MAIN, and GAIN, I want to emphasize that all investing has inherent risk and BDCs are more risky than many other forms of investing. It is important you do your research and understand what you are investing in prior to doing so. Companies which pay higher yields may be more susceptible to risk, especially in times of economic crisis like what we see now.

This video analyzes the BDCs Main Street Capital Corporation, ticker MAIN; Gladstone Investment Corporation, ticker GAIN; and Ares Capital Corporation; ticker ARCC. We examine in this video NAV, NAV per share (NAV/Shar), price per NAV (price/NAV), NII (net investment income), DNII (distributable net investment income), the non-accrual ratio (non-accruing loan ratio), and weighed average portfolio yield. We also discuss dividends, dividend yield, dividend growth, and dividend income. Each of these three BDCs are currently in my dividend portfolio. My dividend growth portfolio is described in some of my other videos. Thank you so much for watching and, as always, good luck with your investing.

Used in this video:
www.Fidelity.com
www.bdcinvestor.com

DISCLOSURE: I am long MAIN and ARCC but am considering the sale of GAIN at the time I made this video.

DISCLAIMER: All information and data on this YouTube Channel is solely for entertainment purposes. The information herein is based solely on my personal opinion and experience. All investments hold inherent risk, and the information provided on this YouTube Channel should not be interpreted as guidance, recommendations, offers, advice, or suggestions. Any ideas and strategies discussed on this channel should not be implemented without first considering your financial and personal circumstances or without consulting a financial professional.

#Dividends #MonthlyDividends #BDC

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