Who is Monroe Capital?
When you invest in the long term, like I do with my retirement plan of choice, you don’t want to get into a stock that has a nice payout, only to find out their business dealings are less than desirable. When this happens, the payout won’t last very long. The game of finding dividend stocks is hard because most of them are very pricey and the beaten down ones fall into what I just laid out in my last sentence more often than not.
We all want to get into a solid paying stock before the dividend gets slashed!
Well, maybe not millenials, since they don’t save well.
Well, today I’m happy to present you Monroe Capital Corp, which trades under the NASDAQ symbol MRCC. You probably haven’t heard of this Chicago-land company, and that’s just fine. I’ll be honest, whenever I find a good investment, it’s normally something I knew very little about prior to doing my homework. The only outlier there would have been Google. (Alphabet.) As an Internet Marketer, I was way ahead of that curve and saw that coming down the pipe years before it went public.
How can Monroe Pay 14%?
They are in the lending business that offers financing to lower-middle-market businesses. Making equity and debt investments, they focus on lending.
They carved out a niche by lending to smaller businesses because of regulations in the banking space that don’t make it feasible for your average bank to lend to these sorts of companies. Due to this, the lower to middle size companies have to pay more for their financing, and this is exactly where Monroe Capital Corp comes into play.
In terms we can all understand, the company collects huge interest payments from it’s lending portfolio and passes along the wins to shareholders via dividends.
While this may not seem safe investing in high yield debt, the company has honed in on making first-lien loans. When someone wants to borrow money, it normally has to put up an asset (or more) as collateral. This way if there is ever a default, the collateral can be liquidated and re-pay the lender.
However, in cases where someone owes money to more than one lender, the problem becomes who is the first-lien holder?
A whopping 86.3% of Monroe’s portfolio is a first-lien loan. This mitigates a lot of the risk involved, in my opinion, (since they have collateral.)
Further, at the end of quarter 3 in 2018, the company ha s$482.3 million spread across 66 portfolio companies that span 10 different industries.
Is Monroe a Safe Play?
Since the stock has tumbled lately it could be undervalued. The September 2018 net asset value was $12.95 per share, and when I started this article the share price was about $10.00. That represents a tremendous value when you consider nothing really changed fundamentally over the last few months.
I’m picking up some shares at a 20% discount. Call me a sucker for a good dividend yield!
As always, I’m not giving investment advice. Please talk to a professional. These are my opinions and are for entertainment only. Not responsible for any losses.
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About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.