Main Street Capital (NYSE:MAIN) announced an increased dividend of $0.235, set to be distributed on November 15, which has pushed the yield up to 6.9%. This comes amid concerns about the sustainability of such a payout due to negative free cash flows and earnings that are only just covering previous dividends.
The company's earnings per share (EPS) is projected to fall by 14.1% within the next year, according to recent trends. This could lead to as much as 87% of earnings being allocated for dividends. This would be a significant increase from current levels and could put additional pressure on the company's financial health.
Despite previous dividend cuts, Main Street Capital has maintained an annual dividend growth rate of 4.6% since 2013. Additionally, the company's five-year EPS growth rate stands at 5.3%, and its low payout ratio signals the potential for future dividend growth.
However, these positive indicators are overshadowed by the company's current financial strain. The high yield and increased dividend come with a heightened risk profile given the negative free cash flows and barely covered dividends. As a result, investors will need to closely monitor Main Street Capital's financial performance in the coming quarters.
InvestingPro Insights
InvestingPro's real-time data and tips offer additional insights into Main Street Capital's financial situation. With a market cap of $3350M and a P/E ratio of 9.16, the company has shown significant revenue growth of 40.51% over the last twelve months as of Q3 2023. The dividend yield as of late 2023 is 8.98%, highlighting the company's commitment to returning value to shareholders.
InvestingPro Tips shed light on this further. The company has raised its dividend for three consecutive years and has maintained dividend payments for 17 consecutive years. This consistency in paying dividends is a positive sign for investors, even though two analysts have revised their earnings downwards for the upcoming period.
These insights, along with the 100+ additional tips available on InvestingPro, can help investors make informed decisions about their investments in Main Street Capital.
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