Is Main Street Capital Stock a Buy, Sell, or Hold With Shares 15% Below Their 52-Week High?

Main Street Capital (NYSE: MAIN) is a business development company (BDC) that is required to distribute at least 90% of its taxable earnings to shareholders to avoid being taxed at the corporate level. This characteristic is similar to that of a real estate investment trust (REIT), and Main Street Capital tends to offer an attractive yield.

However, due to its conservative business model, the equation changes for dividend investors. The recent 15% decline in the stock price from its 52-week high, as of the time of writing, could present a buying opportunity for conservative investors.

BDCs like Main Street Capital generate revenue by selling stock and issuing debt, which they then use to make loans to smaller companies. These companies often lack better financing options, such as issuing stock or debt on public markets, and may not qualify for bank loans due to high interest rates. This enables Main Street Capital to charge high interest rates on its loans, providing a substantial return for investors.