ARCC - Ares Capital's 9% Yield Is A No-Brainer

2024-05-06 23:46:45 ET

Summary

• Ares Capital reported good results for Q1. The portfolio looks healthy, although the non-accrual percentage slightly increased in the last quarter.
• The BDC continues to provide strong dividend coverage, making it a favorable investment choice for income investors.
• Ares Capital saw double-digit total investment income growth Y/Y in Q1'24.
• Shares continue to trade below my fair value estimate.

Ares Capital ( ARCC ) reported decent results for its first fiscal quarter last week. The BDC benefits from broadly favorable credit trends in its portfolio and Ares Capital continues to provide strong dividend coverage, based off of net investment income, to investors that buy the BDC’s shares chiefly to generate recurring dividend income. Ares Capital's net asset value also rose, quarter over quarter, to $19.53 per-share which results in a slight increase in my fair value estimate for shares of the BDC. With ARCC selling at a very reasonably P/NAV ratio, I believe the risk profile for dividend investors remains widely favorable after the company's Q1'24 earnings sheet! ...

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