What do you look for in a company? Earnings growth? Solid management? A juicy dividend? If you answered "All three," then I have something for you. There is a financial services company out there with high insider ownership and a bright future. Oh, and it has a dividend yield of more than 10%.
Before you get too excited, let me explain one thing about dividends. Some companies are mandated to pay out nearly all of their earnings in the form of distributions. So it's not that these companies just love you and want you to have their money, it's that they have to. Another note: A fat dividend yield does not always yield a good investment. If the company is issuing debt out the wazoo so it can give its investors a check every month, that's a red flag. If a company is not improving fundamentals and not investing in the future, that's a red flag. Income-oriented investors may love to see their investment pay off in guaranteed installments, but it's only guaranteed if the company continues to exist.
I'm being a Negative Nancy because I am presenting a company that is required to pay you almost everything that comes through the door, but it is also a great company with solid chances of capital appreciation.
Just tell me already
OK, OK, I'm sorry. It's Prospect Capital (NYSE: PSEC ) , guys. Prospect is technically a "business development company." If that means nothing to you, the best way to explain what Prospect does is that it's a private equity firm. Now hold on just a minute, stay with me! Prospect provides financing, restructuring, and, well, business development services