At first glance, it seems that a hefty initial investment is required to generate any significant income in today’s environment. The average annual dividend yield of all S&P 500 companies right now is 1.88%. So if an investor wants to earn an extra $10,000 of income a year from dividends, simple calculation shows that they would need an initial outlay of $531,915. As a result, some people have ditched the idea of income investing altogether and moved into the more profitable—but also significantly more risky—business of trading. But before you put your money in the hottest high-momentum tech stock, note that you don’t need to be an ultra-high-net-worth individual to earn a decent return from an income portfolio. In fact, the company I’m about to show you is now paying investors $10,000 a year on just $123,457 of initial investment. Better yet, the checks are mailed out to investors on a monthly basis.
The company in question is Gladstone Investment Corporation (NASDAQ:GAIN), a business development company (BDC) headquartered in McLean, Virginia. For those not in the know, BDCs are closed-end funds that invest in small- and medium-sized businesses. Compared to venture capital funds that also focus on early stage companies, BDCs are different because many of them are publicly traded. This means small investors have a chance to in tap into the growth of these companies and liquidity is not an issue. Here’s the best part: BDCs are structured as regulated investment companies (RICs), meaning they pay little or no income tax at the corporate level. In return for having this tax pass-through status, they are required to distribute at least 90% of their taxable income to investors in the form of dividends.
Source: Income Investors
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