Paying a juicy 10.5% and bankrolling some of the hottest tech startups in the country, this is a must-have stock if you are looking to add exposure to a fast-growing sector and keep your dividend income growing. Now is the time to pick up shares of this under-followed, high-yield business.
New technology companies are a driving force in the current economy. With overall growth flat or declining in many sectors, a dose of new tech company exposure could add a nice return boost to your portfolio. However, not all new tech IPOs are successful, and many recent public offerings now have share prices that are much lower than where traded on the IPO date. One business development company can give you exposure to the next generation of tech winners and let you earn a nice dividend yield as you wait.
New tech startups go through several phases before they go public or are bought out by a larger company. In the early days of a new company’s life, venture capitalists provide the money the new enterprise needs to develop and grow its business. The VC’s take equity or ownership stakes in the new companies. At this stage the success of a new company is not certain. Venture capitalists take high-risk gambles on new startups with the expectation that a few will survive, become very successful and generate very large returns on the initial equity investments.
As the new tech company moves through its early life cycle, the business will reach a level where the business is viable, but not yet large enough to put the company on the market, either as an IPO or to a private buyer. At that point, the VC company does not want to make additional equity investments and dilute its position in the company.
This is where today’s focus company comes in. Hercules Technology Growth Capital Inc. (NYSE: HTGC) is a business development company (BDC) that provides business loans to expansion stage technology companies. Hercules maintains relationships with over 500 venture capital and private equity firms, and these firms direct their investments to talk to HTGC about their business borrowing needs.
Leave A Comment