Ares Capital

ARCC

Market cap $13.6B

Ares Capital (ARCC) reported earnings 30 days ago. What's next for the stock?

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April net investment activity reached a multi-year low as rising stock valuations and BDC sector weakness prompted a cautious approach and selective BDC purchases. Focused April allocations on Ares Capital, Blue Owl Capital, and Hercules Capital, yielding a 7.5% average on new investments despite sector headwinds. Dividend income set a modest April record at $990, up 3% year-over-year, with BDCs contributing 27% of Q2 year-to-date dividends but facing potential further cuts.

Ares Capital: Too Many Risks Brewing

NEW YORK--(BUSINESS WIRE)--Ares Capital Corporation (“Ares Capital”) (NASDAQ: ARCC) and Ares Strategic Income Fund (“ASIF”) announced today renewals, commitment increases and enhanced terms for each of their respective bank-led Revolving Credit Facilities. Ares Capital increased the commitment on its existing credit facility by approximately $170 million to approximately $5.5 billion, decreased the funded borrowing costs by 0.10% per annum to reflect the elimination of the SOFR credit spread ad.

Recently, Zacks.com users have been paying close attention to Ares Capital (ARCC). This makes it worthwhile to examine what the stock has in store.

There is a principle I have followed for 30 years in this business. When the smartest credit team on the planet starts aggressively buying a beaten-down asset class they understand better than anyone alive, you do not sit on your hands and debate whether the timing is perfect.

Holding a high-yield dividend portfolio in a taxable account at the 24% federal bracket means writing the IRS a $14,400 check every year on $60,000 of income that should have been yours.

At the 24% federal bracket, a portfolio throwing off $42,000 in dividend income hands roughly $10,080 to the IRS every year.

Dividend-growth blue chips like Coca-Cola double income in nine years despite lower starting yields, while high-yield BDCs and REITs with frozen payouts risk delivering less income over a decade than lower-yield growers.