Main Houston
Main Street Capital's home market of Houston. Source: Main Street Capital.

Dividend investors rely on the income that their stocks generate, either to provide ready cash for their living expenses or to free up funds for further investment. Yet one of the most annoying things about most dividend stocks is that they only make payouts four times a year, which doesn't fit well with the monthly expenses that most people have. A few select companies, though, make monthly dividend payments, and Main Street Capital (NYSE:MAIN) is one dividend payer that has been making payments month in and month out for more than six years.

Main Street Capital is a special type of entity called a business development company, which allows it to take advantage of some favorable tax provisions that give shareholders the benefit of receiving almost all of the income that the company generates in the form of dividends. In the process, Main Street offers access to privately held investments that aren't available to regular investors directly, and it seeks to earn the best returns while managing risk accordingly. Let's take a closer look at Main Street Capital and its monthly income.

Dividend Stats on Main Street Capital

Current Monthly Dividend Per Share

$0.17

Current Yield

6.5%

Additional Supplemental Dividends Paid Per Share, Past 12 Months

$0.525

One-Year Total Return

9.4%

Source: Yahoo! Finance.

The basics of Main Street Capital
Like many business development companies, Main Street Capital focuses on providing capital to smaller businesses, both in the form of debt as well as through equity investment. Main Street in particular targets lower-middle market companies with annual revenue between $10 million-$150 million, offering what it calls "one-stop" financing alternatives and partnering with entrepreneurs and management teams in order to find the best way to capitalize promising young businesses. Main Street also makes debt-financing available to larger middle-market companies. Main Street's portfolio includes companies in a wide variety of industries, ranging from energy services to farm and ranch supplies and from a pizza chain to a regional jewelry retailer.

Main Lumber
This lumber company is one of Main Street's portfolio businesses. Source: Main Street Capital.

Main Street Capital just recently celebrated an important milestone in its development, as Standard & Poor's awarded the BDC an investment-grade bond rating. Because Main Street Capital has to access the credit markets in order to raise the capital it needs to extend to its own portfolio companies, keeping interest costs as low as possible helps drive more profits to the bottom line. Rivals Ares Capital (NASDAQ:ARCC) and Prospect Capital (NASDAQ:PSEC) have enjoyed the benefits of investment-grade ratings, and Main Street should now be able to negotiate lower rates for future financing. That will be especially helpful to take advantage of currently low long-term rates to refinance its Small Business Investment Company loans from the Small Business Administration as well as its current obligations from its credit facility.

Main Foster

Main Street CEO Vincent Foster. Source: Main Street Capital.

In addition, Main Street Capital has an executive team that's financially committed to the success of the BDC. CEO Vincent Foster recently held a stake in the business development company worth more than $45 million, while several other key C-suite members have multimillion-dollar positions in Main Street shares. Moreover, many of those executives regularly reinvest their monthly dividends into buying more shares, upping their positions and demonstrating their continued confidence in Main Street's ability to keep growing.

Main Street Capital has also used its reputation to build up what could potentially be an even larger source of business. The company recently partnered with Hines Securities on its Main Street HMS Income Fund BDC, which isn't publicly traded. Even though it doesn't have to engage in any sales activity, Main Street gets a management fee 1% of assets plus 10% of any returns above an annual threshold of 7.5%. Because of its success, Main Street has seen asset levels rise, and the investment income it's generating could eventually have a much larger impact on overall earnings for the BDC.

Looking forward, the one thing Main Street Capital investors need to keep an eye on is whether the company will be able to see its income from its debt investments rise in tandem with overall levels of interest rates. As long as it can sustain its interest margins by having investment income rise with its cost of capital, Main Street Capital appears well-positioned to keep paying steadily growing monthly dividends well into the future.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.