Over the past several years, Main Street Capital (NYSE:MAIN) has been a great place to put your money. As the BDC (business development company) has expanded, so too has the company's ability to lend to various enterprises, which has led in turn to management becoming capable of paying out larger distributions over time. My own assessment regarding this firm is that it will likely remain a good place for investors to park their money for the foreseeable future, but the deeper I dig, the more I have to conclude that Main Street's best days of growth are behind it absent M&A activity.
An introduction to LMM
As it stands today, there are three core parts that make up Main Street: MM (Middle Market), Private Loan, and LMM (Lower Middle Market). In a prior article, I made the case that the firm's rising exposure to the Private Loan space and the changes experienced within that space mean that further distribution growth will almost certainly be smaller than it has been in the past. In short, a focus on larger EBITDA firms has reduced the yields that management could get from investing in these arguable safer enterprises.
