ARCC - Ares Capital Q4: A 10%-Yielding Piggy Bank

2024-02-12 17:27:33 ET

Summary

• Ares Capital reported better than expected results for Q4'23.
• The BDC has a well-functioning loan portfolio and is growing its net investment income and net asset value.
• Loan quality for Ares Capital is positive, with the trend showing a general decline in non-accrual percentage over the last four quarters.
• My fair value estimate is $21.17 per-share, and I continue to see Ares Capital as a buy following the Q4 report.

Ares Capital ( ARCC )'s shares gained more than 1% after the BDC reported better than expected results for the December quarter. Ares Capital's portfolio is performing well, net investment income is growing by the double-digits, and the BDC has seen an expansion in its debt yields due to higher interest rates in the U.S. economy. Ares Capital is currently trading at 1.04X P/NAV ratio, which is slightly above the longer-term average price-to-NAV ratio. Ares Capital is a top high-yield stock and acts as a 10%-yielding piggy bank with very impressive portfolio performance and indications of growing loan demand making shares attractive from an income and yield perspective!...

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