Has Apollo Investment Corp. (AINV) Become the Perfect Stock?

Business development companies have gotten a lot of attention lately because of their high distribution yields. With traits resembling private-equity investments, BDCs enjoy special tax breaks that encourage big payouts to income investors. For its part, Apollo’s focus lately has been on secured loans and subordinated debt, with a big stable of private companies among its investments.

Unfortunately for Apollo, one thing that stands out is its substantial reduction in payout over the past several years. By contrast, Main Street Capital Corporation (NYSE:MAIN) has maintained its streak of steadily rising monthly dividends since going public in 2007, and Ares Capital Corporation (NASDAQ:ARCC) recently raised its payout above the level it had paid in 2008, before the financial crisis forced it to reduce its distribution. Prospect Capital Corporation (NASDAQ:PSEC) cut its dividend in 2010, and it has since managed to increase that payout slightly, producing a more attractive yield for investors.

Yet as American Capital Ltd. (NASDAQ:ACAS) has shown with its no-dividend policy lately, total returns are more important than payouts. On that score, Apollo’s falling revenue is somewhat troubling, as most of its peers have seen gains.

For Apollo to improve, it needs to find ways to bolster its business to keep up with its competitors. If it can do so, though, it could well get itself closer to perfection in the years ahead.

The article Has Apollo Investment Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned.

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