| When we measure dividend safety for BDCs, we use a metric of cash flow called net interest income, or NII. Main Street Capital's NII has been steadily rising for a number of years. In 2024, NII rose 3% from $384 million to $395 million. This year, NII is projected to grow 11% to $438 million. By law, BDCs must pay out 90% of their profits to shareholders in the form of dividends. NII is different from profits, but as a result of that law, BDCs often pay out all or nearly all of their NII in dividends. For that reason, I'm comfortable with a payout ratio of 100% of NII or lower. If it's above 100%, the company isn't generating enough cash flow to pay the dividend. But as long as it's below 100%, that's okay. With that in mind, let's check on Main Street's payout ratio to ensure it can afford its monthly dividend. |
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