Why Main Street Capital is My Top High-Yielding Monthly Dividend Buy for Passive Income in 2026

For passive income investors seeking stability and growth, Main Street Capital Corporation (NYSE: MAIN) stands out as a compelling choice in 2026. Its combination of consistent monthly dividends, strategic supplemental payouts, and a diversified portfolio positions it as a superior option compared to peers like W.P. Carey (WPC) and Ares Capital (ARCC). This analysis examines why Main Street Capital's approach to income sustainability and IRS compliance makes it a top-tier buy for those prioritizing predictable cash flow.

Consistent Monthly Payouts and Supplemental Dividends

Main Street Capital has demonstrated remarkable consistency in its monthly dividend program. For the fourth quarter of 2025, the company declared regular monthly dividends of $0.255 per share, totaling $0.765 per share for the quarter-a 4.1% increase compared to the same period in 2024. Looking ahead, the first quarter of 2026 will see monthly dividends rise to $0.26 per share, reflecting a 2.0% quarterly increase. This incremental growth underscores the company's ability to balance investor returns with operational flexibility.

Beyond regular payouts, Main Street has also leveraged supplemental dividends to reward shareholders. In 2025, a $0.30 per share supplemental dividend was declared in September, and another is scheduled for December 2025 according to press releases. These supplemental payments, often tied to excess net investment income, provide an additional layer of income without overburdening the company's cash flow.

By combining regular and supplemental dividends, Main Street ensures a robust yield while maintaining compliance with IRS requirements for Business Development Companies (BDCs), which mandate the distribution of at least 90% of taxable income.

Strong Portfolio Diversification

Main Street's investment strategy is anchored in a diversified portfolio spanning lower middle market (LMM) private equity and private debt. In Q3 2025 alone, the company completed $106.2 million in LMM investments, expanding its cost basis by $61.3 million. This focus on the LMM sector-a niche yet resilient segment of the private credit market-allows Main Street to capitalize on undervalued opportunities while mitigating concentration risk.

In contrast, W.P. Carey's portfolio is heavily weighted toward commercial real estate, with 1,662 net lease properties across North America and Europe. While this model generates stable cash flows, it is inherently exposed to real estate market fluctuations and tenant-specific risks. Ares Capital, meanwhile, operates as a BDC focused on senior secured loans and leveraged credit, which can be more volatile during economic downturns. Main Street's hybrid approach-combining LMM equity and debt strategies-offers a more balanced risk-return profile, particularly in a low-growth macro environment.

IRS-Compliant Income Strategy

Maintaining IRS compliance is critical for BDCs, and Main Street has excelled in this area. Its third-quarter 2025 distributable net investment income (DNII) of $1.03 per share, coupled with a $0.30 supplemental dividend, ensured full compliance with tax regulations. This proactive approach not only safeguards the company's legal standing but also reinforces investor confidence in the sustainability of its dividend program.

W.P. Carey and Ares Capital also adhere to IRS guidelines, but their strategies differ. W.P. Carey relies on long-term net leases with built-in rent escalations to generate stable income according to financial analysis, while Ares Capital periodically issues supplemental dividends to address excess earnings according to market reports. However, Main Street's dual focus on monthly and supplemental payouts provides greater flexibility to adapt to changing market conditions, ensuring consistent returns for passive income seekers.

Comparative Edge: Main Street vs. W.P. Carey and Ares Capital

While W.P. Carey and Ares Capital are respected high-yielding options, Main Street's monthly dividend structure and strategic diversification give it a distinct advantage. W.P. Carey's quarterly dividend of $0.920 per share (5.2% yield) is attractive, but its real estate-centric model lacks the operational flexibility of Main Street's LMM and private debt strategies. Ares Capital's 9.4% yield is impressive, but its quarterly payout schedule and focus on leveraged loans may expose it to greater volatility.

Main Street's ability to increase monthly dividends by 4.1% year-over-year and its proactive use of supplemental payments further differentiates it. For investors prioritizing regular, predictable income, the monthly cadence of Main Street's payouts-combined with its disciplined approach to portfolio management-offers a more reliable and scalable solution.

Conclusion

Main Street Capital's combination of consistent monthly dividends, strategic supplemental payouts, and a diversified LMM-focused portfolio makes it an ideal choice for passive income investors in 2026. Its IRS-compliant approach ensures long-term sustainability, while its growth-oriented strategies position it to outperform peers like W.P. Carey and Ares Capital. As the market navigates macroeconomic uncertainties, Main Street's balanced model offers both stability and upside potential-a rare combination in the high-yield space.