Published on May 5th, 2026 by Bob Ciura
On the surface, monthly dividend stocks are highly appealing for income investors.
That is because these particular dividend stocks pay their dividends every month, instead of once per quarter like most dividend-paying stocks.
Monthly dividend stocks provide shareholders with 12 dividend payments per year, which could be attractive for investors looking for more frequent payouts.
You can download our full Excel spreadsheet of 119 monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:
Capital Southwest Corp. (CSWC) is a monthly dividend stock with a very high yield.
Of course, investors should look further into a company’s financial condition and future outlook.
This article will analyze CSWC in greater detail.
Business Overview
Capital Southwest Corporation is an internally-managed investment Business Development Company, or BDC.
The company specializes in providing customized debt and equity financing to lower middle market (LMM) companies and debt capital to upper-middle market (UMM) companies located primarily in the United States.
On February 2nd, 2026, Capital Southwest reported its fiscal Q3-2026 results for the period ending December 31st, 2025. CSWC’s fiscal year ends on March 31st.
In the most recent quarter, Capital Southwest’s total investment income rose to $61.4 million from $56.9 million, driven by portfolio growth and stable cash yields, partially offset by lower fee income.
PIK interest remained well controlled, supporting earnings durability. The weighted average debt yield edged down to 11.3% from 11.5% due to portfolio mix and repayments.
Pre-tax net investment income was $34.6 million, or $0.60 per share, versus $34.0 million, or $0.61, reflecting higher average shares outstanding.
Undistributed taxable income declined to $1.02 per share after supplemental dividends, while regular dividends remained fully covered and cumulative dividend coverage continues to exceed 100%.
CSWC’s credit portfolio expanded to 132 lower- and upper-middle-market companies, up from 126 in the prior quarter.
The approximately $2.0 billion investment portfolio remains heavily weighted toward 1st lien secured debt, whichrepresents the vast majority of credit holdings.
Portfolio diversification remains strong across more than 20 industries, with Healthcare Services, Media & Marketing, and Food/Agriculture & Beverage continuing to rank among the largest sector exposures.
For FY2026, we expect NII/share of $2.35.
Growth Prospects
Capital Southwest’s annual net investment income per share has risen from $0.61 per share in 2017, to an estimate of $2.35 for 2026.
In turn, shareholders have received a high yield, as is typical for BDCs. CSWC’s prolonged history as a BDC company, and experienced management team, have allowed it to sustain a double-digit investment yield most of the time.
The company has refinanced its own loans at lower rates over time, resulting in higher net investment income.
Additionally, with only 30 employees, operating expenses as a percentage of total assets have also been declining. They were 4.9% in FY2016, but are currently less than half this amount at 1.7%.
The higher dividends seen over the past few years are due to special dividends that the company can afford from additional gains (e.g., equity sales), which are not recorded as investment income.
As a result, both the supplemental and special dividends are technically covered. We expect both NII/share and the base per-share dividend to grow by around 1% per year over the next five years.
Dividend & Valuation Analysis
On July 23rd, 2025, Capital Southwest declared a base monthly dividend of $0.1934 (switching from quarterly payments). The base annualized dividend remains at $2.32 per share.
For 2026, we estimate a dividend payout ratio of 99% in terms of NII-per-share. Normally, this would be a red flag.
But Capital Southwest’s dividend should be considered safer than its 99% payout ratio implies, considering the supplemental payouts, the special payouts, and the latest quarterly dividend increase.
The payout ratio does not include the realized gains that are in the form of non-investment income, resulting in the abnormally high figure.
CSWC is currently trading at a 2026 price-to-NII ratio of 10.3, which is slightly above our fair value estimate of 10.
A declining valuation multiple could reduce annual returns by 0.5% per year. Offsetting this will be estimated NII-per-share growth of 1% per year, as well as the 9.6% dividend yield.
Overall, total returns are estimated at 8.7% per year over the next five years.
Final Thoughts
Capital Southwest is a diversified business development company and one of the oldest in the market, having navigated through numerous economic cycles.
Its financials have been growing fast following the 2015 spinoff, and its optimal financing costs have resulted in a prudent portfolio expansion.
We forecast annualized returns of 8.7% per year, excluding any supplementary dividends, powered primarily by the stock’s hefty dividend yield, and modest business growth.
We rate the stock as a hold due to the elevated dividend risk.
Additional Resources
Don’t miss the resources below for more monthly dividend stock investing research.
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
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