Main Street Capital Corp (MAIN) has been one of the best-performing stocks in the business development (BDC) sector over the long term. Because of its success, MAIN trades at a steep premium to NAV and sports a lower yield than all of its BDC peers. So, I want to introduce you to a MAIN alternative with some great appreciation potential and yield.
Since its 2007 IPO, the MAIN share price has appreciated by 268%, and with dividends reinvested, it has provided a 1,630% total return. That total return works out to a 16.6% compound annual growth rate.
Looking at shorter-term past performance, its five-year total return was 91.8%, or 13.9% annual compounding. The returns from MAIN have far outrun the dividend yield, which is 5.7% based on the current regular monthly dividend rate.
The MAIN returns have been boosted by steady NAV appreciation and regular, significant supplemental dividend payments.
On January 30, 2025, Main Street Capital announced the public offering and NYSE listing of shares of MSC Income Fund (MSIF). MSIF is an externally managed BDC managed by Main Street’s registered investment advisor.
The MSIF IPO price was $15.53 per share. The BDC currently trades for $12.86. Since the IPO, MSIF has not been a great pick for investors.
However, what the investing public has failed to grasp is that the MSIF portfolio mirrors the investments held by Main Street Capital. For example, here is an excerpt from a recent Main Street press release (emphasis added):
Main Street Capital Corporation (NYSE: MAIN) (“Main Street” ) is pleased to announce that it recently completed a follow-on investment in its existing portfolio company, UBM ParentCo, LLC, doing business as United Business Mail (“UBM” or the “Company), a leading provider of “marketing mail” commingle services, specializing in optimizing postage, transportation and delivery performance for large-scale mailers. Main Street, along with its co-investor MSC Income Fund, Inc. (NYSE: MSIF) (“MSIF”), made the follow-on investment in UBM to support the Company’s strategic acquisition of a leading national provider of asset-light palletized mail consolidation, mail optimization services, freight brokerage, and warehousing and distribution for business to business, or B2B, and business to consumer, or B2C, customers. Main Street’s portion of the investment consisted of an additional $15.6 million first lien, senior secured term debt investment. Main Street and MSIF initially invested in UBM in December 2025.
MSIF trades at a deep discount to the MAIN valuation. MSIF trades at 83% of NAV, compared with MAIN’s premium valuation. MSIF has a current yield of 10.9%.
My thesis is that as MSIF develops a longer track record, and investors start to realize that its portfolio reflects the MAIN investments, the MSIF share price will climb to a premium to the current NAV of $15.55.
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