Is Hercules Capital the Best Dividend Stock for You?
Like dividends? A little outfit called Hercules Capital (NYSE: HTGC) dishes them out in a big way. Shares of this business development company boast a trailing dividend yield of a little over 8%, in fact, and that's based on just its ordinary quarterly payout. Adding its supplemental dividend to the mix cranks the trailing-12-month yield up to nearly 10%. Not bad.
Before plowing into a new stake in this name based on nothing other than its big yield, however, you might want to dig deeper into the company's details. Hercules Capital may be a great dividend stock for some income-minded investors, but it's a lousy one for others.
As a business development company, or BDC, Hercules Capital provides Capital to up-and-coming companies that don't want to tap public markets but also don't qualify for a loan from a conventional or corporate bank. Sometimes these funds are offered in exchange for equity in the company in question. More often than not, however, these are loans made at relatively high interest rates. Hercules says the effective interest yield on its loan portfolio is just under 15%.
Source Fool.com
