The following information was previously provided to subscribers of Premium BDC Reports along with:
MAIN target prices/buying points
MAIN risk profile, potential credit issues, and overall rankings. Please see BDC Risk Profiles for additional details.
MAIN dividend coverage projections (base, best, worst-case scenarios). Please see BDC Dividend Coverage Levels for additional details.
Quick Quarterly Update (September 30, 2021)
Earnings: Easily beat its best-case projections due to another record level of $23 million of dividend income with NII per share of $0.714 and distributable net investment income (“DNII”) of $0.76 per share easily covering its dividends of $0.615.
Dividends: As predicted in the best-case projections from the previous report, MAIN increased its regular monthly dividends from $0.210 to $0.215 per share for Q1 2022 which is a 2.4% increase from Q4 2021. Also, the company announced a supplemental dividend of $0.10 per share payable in December 2021.
NAV Per Share: An increase of 3.6% mostly came from its Lower Middle Market (“LMM”) and accretive share issuances similar to previous quarters.
Credit Quality: Eight investments on non-accrual status accounting for 0.9% (previously 1.2%) of the investment portfolio at fair value and 3.5% at cost.
This information will be discussed in the updated MAIN Deep Dive Projections report.
This supplemental cash dividend, which will be payable as set forth in the table below, will be paid out of Main Street’s undistributed taxable income (taxable income in excess of dividends paid) as of September 30, 2021.
MAIN Q3 2021 Quick Update
For Q3 2021, MAIN easily beat its best-case projections due to another record level of $23 million of dividend income with NII per share of $0.714 and distributable net investment income (“DNII”) of $0.76 per share easily covering its dividends of $0.615. The additional dividend income and NAV per share increase of 3.6% mostly came from its Lower Middle Market (“LMM”) similar to previous quarters. As predicted in the best-case projections from the previous report, MAIN increased its regular monthly dividends from $0.210 to $0.215 per share for Q1 2022 which is a 2.4% increase from Q4 2021. Also, the company announced a supplemental dividend of $0.10 per share payable in December 2021 driven by realized gains discussed in the previous report including NRI Clinical Research and Safety Holdings.
“The third quarter represented another quarter of sequential growth in total investment income and included another record level of dividend income from our portfolio equity investments. In addition, primarily due to the continued favorable performance of our portfolio companies, our net asset value per share increased by 3.6% during the quarter. Net investment income and distributable net investment income for the quarter of $0.71 and $0.76 per share, respectively, are both Main Street quarterly records, and together with the significant net gains realized on several equity investments in the quarter, provided our board of directors the comfort to declare the supplemental dividend to our shareholders of $0.10 per share in December and another increase to our monthly dividends in the first quarter of 2022.”
As predicted, MAIN has been upgraded mostly due to continued improvement in MAIN’s net interest margins as well as continued NAV per share increases and additional realized gains. As mentioned in previous reports, I am expecting dividend coverage to improve over the coming quarters due to:
Continued dividend income from portfolio companies.
Effective October 30, 2020, MAIN became the sole adviser/manager to HMS and the company will now receive 100% of all management and incentive fees.
Portfolio growth (increased interest income).
Lower borrowing rates.
Lower non-accruals (increased interest income from restructured investments).
As of September 30, 2021, there were eight investments on non-accrual status, which comprised 0.9% (previously 1.2%) of the investment portfolio at fair value and 3.5% at cost. During Q3 2021, MAIN fully exited its investments in NRI Clinical Research, realizing a gain of $8.8 million as well as Safety Holdings, realizing a gain of $4.5 million.
In October, MAIN issued an additional $200 million of the 3.00% Notes at a premium to par of 101.74% resulting in a yield-to-maturity of 2.60%.
“We are also very pleased that we were able issue an additional $200 million of fixed rate, long-term investment grade debt at an effective rate of 2.6% in October, representing our lowest rate ever on an investment grade debt issuance and providing further improvement to our strong capital structure and additional liquidity to fund the continued future growth of our investment portfolio. As we look forward to the remainder of the year and into 2022, we believe we are very well positioned to continue to execute on our diversified strategy and to continue to provide superior results.”
What Can I Expect Each Week With a Paid Subscription?
Each week we provide a balance between easy to digest general information to make timely trading decisions supported by the detail in the Deep Dive Projection reports (for each BDC) for subscribers that are building larger BDC portfolios.
Monday Morning Update – Before the markets open each Monday morning we provide quick updates for the sector including significant events for each BDC along with upcoming earnings, reporting, and ex-dividend dates. Also, we provide a list of the best-priced opportunities along with oversold/overbought conditions, and what to look for in the coming week.
Deep Dive Projection Reports – Detailed reports on at least two BDCs each week prioritized by focusing on ‘buying opportunities’ as well as potential issues such as changes in portfolio credit quality and/or dividend coverage (usually related). This should help subscribers put together a shopping list ready for the next general market pullback.
Friday Comparison or Baby Bond Reports – A series of updates comparing expense/return ratios, leverage, Baby Bonds, portfolio mix, with discussions of impacts to dividend coverage and risk.
This information was previously made available to subscribers of Premium BDC Reports. BDCs trade within a wide range of multiples driving higher and lower yields mostly related to portfolio credit quality and dividend coverage potential (not necessarily historical coverage). This means investors need to do their due diligence before buying including setting target prices using the portfolio detail shown in this article (at a minimum) as well as financial dividend coverage projections over the next three quarters as discussed earlier.
