Dividend Stocks to Buy for Double-Digit Returns: Main Street Capital (MAIN)
Dividend Yield: 5.7%
It’s a lot easier to generate a double-digit annual return when you’re not having to pay federal income taxes. And that brings me to our next pick, business development company (BDC) Main Street Capital Corporation (NYSE:MAIN).
BDCs pay no federal income taxes so long as they distribute at least 90% of their profits as dividends. So as you might imagine, they tend to be among the highest-yielding dividend stocks out there.
Main Street is somewhat quirky in that it pays a regular monthly dividend that it augments with one or two special dividends per year. While this is not the industry norm, it makes sense. By allowing for a special dividend that varies with profitability, it reduces the risk that the company would have to lower its dividend if it hit a rough patch.
Let’s look at the numbers. At current prices, Main Street’s regular monthly dividend of 18.5 cents amounts to a yield of 5.7%, and the special dividends chip in another 1.4%. So the dividends alone account for about 7.1% in annual return. That means that the company only has to manage a measly 2.9% in capital appreciation per year to hit that double-digit mark.
That doesn’t sound too hard, does it?