ARDC: High-Yield Fund, Fully Covered Distribution, Yielding 9.5% Plus, But There Are Risks

(18min)

Summary

  • Ares Dynamic Credit Allocation Fund is a dynamically managed high-yield fixed-income fund that focuses on generating high current income. Its investment portfolio consists of floating-rate bank loans, high-yield bonds, and CLO securities.
  • ARDC currently offers a very attractive and fully covered 9.5% plus distribution yield and is currently trading at a small discount of roughly -4.3%.
  • However, there are some risks involved depending on the direction of interest rates. The fund is fairly priced after the premium has moved to a discount in recent weeks, but it can still get cheaper from current levels.

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Introduction:

Ares Dynamic Credit Allocation Fund (NYSE:ARDC) is a closed-end fund that was incepted in Nov. 2012. The fund primarily invests in senior secured loans and high-yield corporate bonds. A portion of the portfolio is also invested in CLOs (collateralized



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Analyst’s Disclosure:I/we have a beneficial long position in the shares of ABT, ABBV, CI, JNJ, PFE, NVS, NVO, AZN, UNH, CL, CLX, UL, NSRGY, PG, TSN, ADM, BTI, MO, PM, KO, PEP, EXC, D, DEA, DEO, ENB, MCD, BAC, PRU, UPS, WMT, WBA, CVS, LOW, AAPL, IBM, CSCO, MSFT, INTC, T, VZ, CVX, XOM, VLO, ABB, ITW, MMM, LMT, LYB, RIO, O, NNN, WPC, ARCC, ARDC, AWF, BDJ, CHI, DNP, PEO, USA, UTF, UTG, TLT 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.

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