Ares Capital's 10% Yield Just Survived a Tough Quarter. Is the BDC Still a Buy?

3 hours ago 4

Matt DiLallo, The Motley Fool

Sun, May 17, 2026 astatine 1:35 PM CDT 4 min read

Ares Capital's (NASDAQ: ARCC) main gully is its monster dividend yield. At much than 10%, it's astir 10 times higher than the S&P 500's yield.

The business improvement institution (BDC) has paid a stable-to-growing dividend for 67 consecutive quarters. It has endured its stock of pugnacious times implicit the years, including implicit the past quarter. Here's a look backmost astatine its unsmooth 4th and whether the high-yielding dividend stock is inactive a buy.

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A idiosyncratic measuring a output sign.

A unsmooth patch

Ares Capital's halfway net dipped successful the archetypal 4th to $0.47 per share, down from $0.50 per stock successful the 4th fourth and the archetypal 4th of past year. That pushed them down beneath the BDC's quarterly dividend level of $0.48 per share. Despite that, Ares announced its adjacent dividend, payable astatine the extremity of June.

While the institution faced immoderate headwinds successful the period, absorption didn't look excessively concerned. CEO Kort Schnabel led disconnected the quarterly league call by stating, "I judge we are disconnected to a beardown commencement successful 2026 with coagulated net and beardown cardinal portfolio performance. Our halfway net of $0.47 per stock correspond an annualized ROE of 9.6% successful what has historically been a seasonally dilatory 4th for originations." He besides noted that, "heightened superior markets volatility, geopolitical uncertainty, and nett outflows from retail products exacerbated an already seasonally dilatory marketplace play successful the archetypal quarter."

On a much affirmative note, the CEO stated that "Our wide portfolio prime remains steadfast with continued debased levels of nonaccruing loans and occupation assets." One origin driving that presumption is that Ares stress-tested its software-focused portfolio companies to measure the risks of AI-related disruption. It hired a apical consulting firm, which recovered that lone a tiny fraction of its concern portfolio was astatine medium- to high-risk.

What this means for the dividend

The CEO besides discussed the dividend connected the call. He noted that portion halfway net fell beneath the dividend, erstwhile you adhd the $0.15 per stock of nett realized gains it recorded successful the period, net were good supra the payout, "providing a beardown underlying instauration for existent distributions." Further, the BDC has been carrying guardant excess taxable earnings. This $1.38 per-share spillover income from past twelvemonth provides further enactment for the dividend. Additionally, Ares Capital has humble leverage and continues to present recognition show successful enactment with its humanities way record.

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