Main Street Capital: Diving Into Second-Quarter Earnings

Business-development company Main Street Capital (NYSE: MAIN) reported that it earned $0.58 per share in net investment income, covering its distributions to investors during the second quarter. The company also increased its monthly dividend by 3% to $0.19 per share. Here's what investors need to know about its second-quarter earnings report.

BDCs typically make money in three ways: interest on loans, dividends from equity investments, and fees earned when loans are closed or prepaid. Interest income thus tends to be stable and predictable, whereas dividend and fee income tends to be more volatile. Dividends vary with its portfolio companies' profits, whereas fees vary with transaction activity.

Because Main Street Capital holds more equity investments than the typical BDC does, a greater portion of its net operating income, also referred to as net investment income, comes from dividends it receives from its portfolio company investments.

Source: Fool.com