Ares Capital: Assessing Dividend Coverage For Its 10% Yield

Summary

  • One of the largest mistakes that investors make is focusing on historical dividend coverage instead of projected dividend coverage.
  • This article discusses historical and projected dividend coverage for ARCC, which is the largest BDC currently yielding 10% before supplemental dividends.
  • Below I discuss many of the drivers used for projecting dividend coverage followed by my base, best, and worst-case projections for ARCC.
  • If you're not getting this level of detail for each of your BDC investments, please consider taking a more detailed approach to due diligence each quarter.
  • ARCC will be reporting Q2 2023 results this week and below are many of the positive and negative considerations for investors, most of which are discussed in this and the previous articles.
  • Looking for a portfolio of ideas like this one? Members of Sustainable Dividends get exclusive access to our subscriber-only portfolios. Learn More »
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David Gyung

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This article was written by

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BDC Buzz is a professional money manager with over a decade of experience generating institutional-quality research.

He is the leader of the investing group Sustainable Dividends where he provides investors live portfolios with real-time updates, weekly BDC sector updates, company projection reports, baby bond reports, and live chat access to answer questions. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of ARCC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have positions in 18 BDC stock positions, only one of which was discussed in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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