Main Street Capital: Short Seller At Sohn Conference Says Dividend Cut Is Coming

Is it ?

May 14, 2025

NEWS

Victor Bonilla, founder of Jehoshaphat Research, recommends shorting stock of Main Street Capital (NYSE:MAIN) because a dividend cut is likely.

He presented his idea Wednesday at the Sohn Investment Conference in New York.

Main Street didn’t immediately respond to Seeking Alpha’s email request for comment.

Shares of Main Street (NYSE:MAIN) fell 2.7%.Seeking Alpha – May 14, 2025

AGENDA

We do not have access to the Mr Bonilla’s presentation. However, as the news item above indicates, a central thesis for the call is that “a dividend cut is likely”. In this article we’ll review MAIN’s current dividend level and how that compares with its most recent earnings and the analyst consensus for 2025. We’ll review all prospective sources of income and seek to determine if a dividend cut is likely.

Two Fisted

Like many BDCs, MAIN pays both a “regular” dividend – in this case monthly – and a “supplemental” dividend, paid quarterly.

As you can see if you open this link to MAIN’s dividend page on its website, the current monthly dividend is $0.255 a share, just increased from $0.250. Annualized, that comes to $3.06 a share.

The “supplemental” is currently paid out quarterly at $0.300 a share, or $1.200 annualized.

In total, the current running rate comes to $4.26 a share.

In all of 2024, the BDC paid out $4.110 per share, beating out the 2023 level of $3.695, which itself was higher than $2.945 in 2022.

Since the days of super-low rates in 2021, MAIN’s payout – using the current running rate and the 2021 total – has increased by 65%.

By the way, MAIN’s stock price has increased 16% since the beginning of 2022 till today.

Latest Results

In the IQ 2025, MAIN booked Distributable Net Investment Income Per Share of $1.01. DNIIPS is a non-GAAP measure: “Distributable net investment income is net investment income as determined in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP, excluding the impact of non-cash compensation expenses”.

That annualizes to $4.04 of what we call “recurring income”.

For all of 2024, DNIIPS amounted to $4.32.

The Net Investment Income Per Share (NIIPS) last year came to $4.09 and the analyst consensus is for 2025’s result to drop slightly to $3.95.

Left Out

However, not included in the numbers above are any net realized gains.

In 2024, these NET gains came to $46mn, boosted by a $54mn gain on the sale of portfolio company Pearl Meyer & Partners.

In the IQ 2025, MAIN booked ($29.5mn) in net realized losses.

However – on its IQ 2025 conference call, MAIN announced the sale of its portfolio investment in Heritage Vet Partners for a realized gain of $55mn, or $0.62 per share.

In A Related Vein

As of the IQ 2025, MAIN shows a record level of “undistributed earnings” on its balance sheet: $425mn or $4.83 a share.

That’s not the same as “spillover income”, which MAIN did not quantify on its most recent CC.

Unwavering

Management made clear on its latest conference call that it intended to continue to pay both its “regular” and “supplemental” dividends at their current level:

We currently expect to recommend that our Board continues to declare future supplemental dividends to the extent DNII significantly exceeds our regular monthly dividends paid in future quarters, and we maintain a stable to positive NAV. Based upon our expectations for continued favorable performance in the second quarter, we currently anticipate proposing an additional supplemental dividend payable in September.

Notable

It’s worth pointing out that MAIN has been very successful over its history – and especially in recent years – in increasing its Net Asset Value Per Share (NAVPS) – a metric we religiously track at the BDC Reporter.

Since 2019, MAIN’s NAVPS has increased by a remarkable 55%, more than any other BDC.

In the most recent quarter – characterized by virtually all BDCs registering a decrease in their NAVPS – MAIN was 1.2% ahead and 8.4% over the past 12 months.

A higher NAVPS allows the BDC to raise equity capital accretively and enhance its growth both in terms of book value and recurring earnings.

Since 2021, the BDC has increased its share count by 25%.

As we write this, MAIN continues to trade at a huge premium to book: 64%.

Views

Unlikely

None of the evidence – except for the fact that DNIIPS is running below the level of the combined dividends – suggests a dividend cut is coming in 2025 for MAIN.

If such a cut were to occur it would be in the amount of the “supplemental”.

The DNIIPS estimate for 2025 “covers” the “regular” distribution by 26%.

However, the large amount of undistributed income already on the balance sheet; the recent equity gain and the likelihood that more could be coming makes any sort of cut implausible as do the recent reassurances on the MAIN conference call.

No BDC is immune to more difficult macro conditions and – potentially – lower interest rates but there are no signs that MAIN’s forward momentum of recent years will shift into reverse gear.