Final July, I reviewed Primary Road Capital (NYSE: MAIN) for dividend security. The corporate acquired an “A” score. Now that greater than a yr has handed, is the dividend simply as secure?
Primary Road Capital is a enterprise improvement firm, or BDC. It invests in or lends cash to privately held firms.
Its portfolio firms embrace…
- IG Holdings, an 82-year-old firm based mostly in Windfall, Rhode Island, that designs insignias
- PPL RVs, which has been round since 1972
- Willis Group, which supplies staffing and recruitment providers and is predicated in Houston.
After we measure dividend security for BDCs, we use a metric of money move referred to as internet curiosity earnings, or NII.
Primary Road Capital’s NII has been steadily rising for a lot of years.
In 2024, NII rose 3% from $384 million to $395 million. This yr, NII is projected to develop 11% to $438 million.
By legislation, BDCs should pay out 90% of their earnings to shareholders within the type of dividends. NII is completely different from earnings, however on account of that legislation, BDCs typically pay out all or almost all of their NII in dividends.
For that cause, I’m snug with a payout ratio of 100% of NII or decrease. If it’s above 100%, the corporate isn’t producing sufficient money move to pay the dividend. However so long as it’s beneath 100%, that’s okay.
Final yr, Primary Road Capital paid shareholders $320 million, or 81% of NII. This yr, the forecast is $362 million, which comes out to a secure payout ratio of 83%.
Primary Road additionally continues to pay a particular dividend every quarter. For the previous two years, the quarterly particular dividend was $0.30 per share.
We don’t have in mind the particular dividend when figuring out dividend security, as a result of it’s an irregular dividend (although Primary Road has been paying it persistently for some time now).
We solely contemplate the common dividend, which is $0.255 paid every month. That comes out to a 4.7% yield. Add within the $0.30 particular dividend, and the yield climbs to six.5%.
Primary Road has raised the month-to-month dividend yearly since 2011.
Given its stellar dividend-paying monitor file, regular NII development, and affordable payout ratio, Primary Road Capital’s dividend stays very secure.
Dividend Security Score: A
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