ARCC - Ares Capital: High Quality But Awaiting Better Entry (Downgrade)
2024-04-26 13:31:31 ET
Summary
- Ares Capital has provided a total return slightly higher than the S&P 500 since December 2023. However, most of the returns are likely to come from the distribution only.
- The probability of rate cuts has decreased due to high inflation and a strong labor market, which is beneficial for BDCs like ARCC.
- ARCC's diversified portfolio and strong financials make it an attractive option for investors seeking high dividend yields.
- However, ARCC currently trades near all-time highs. In addition, the premium to NAV is higher than the average.
Overview
I previously covered Ares Capital ( ARCC ) in December 2023 with a Buy when there was an expectation that interest rates would come down soon. However, with the latest CPI report reinforcing the idea that the Fed will likely not begin cutting rates any time soon, I wanted to revisit one of my favorite Business Development Companies to provide an update outlook. Since my initial coverage back in December, ARCC has provided a total return that's slightly higher than the S&P 500 ( SPY )....
Ares Capital: High Quality But Awaiting Better Entry (Downgrade)