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A Good Day To Buy ARCC

After the market's close, Ares Capital Corporation (ARCC) announced that it plans to make a public offering of 11,850,000 shares of its common stock. Ares Capital also plans to grant the underwriters an option to purchase up to an additional 1,777,500 shares of common stock.

The price dropped to $16.93 from $17.40 in after hours trading. At $17.00, and with a $0.38/quarter dividend (1.52 per year), the yield is 8.94%. ARCC has a history of providing special dividends on top of the regular dividends. With a $1.57 NII projection, the dividend is "covered". LTM NAV growth has been 2.75%, and that is with special dividends already hurting the NAV growth.

There should be a very slim dividend CAGR projection. I am using 0.9%. So the yield + CAGR for ARCC is below market average. ARCC is not going to make you rich. It is a tool to pry loose income from a portfolio that is invested in growth else where. Because I own some BDCs, I can own lower yielding MLPs that offer growth. Because I own some BDCs, I can own a high growth Health Care/Pharma stocks - and not the low growth big Pharma stocks.

Today will be a chance to buy ARCC at a discount. ARCC is a safer than average BDC. I would suggest buying some ARCC at a discount if you are also "buying growth for your portfolio" in other sectors.

Disclosure: The author is long ARCC.