Better High-Yield Dividend Stock: AGNC Investment vs. Ares Capital Corporation

1 week ago 5

Courtney Carlsen, The Motley Fool

Wed, April 29, 2026 astatine 5:00 AM CDT 5 min read

If you're looking to gain passive income from your investments, look nary further than dividend stocks. However, not each dividend stocks are alike. Some companies wage dividends that turn implicit time. Others instrumentality a much assertive attack with precocious dividend yields that are much susceptible to aboriginal cuts.

If high-yield dividend stocks dependable appealing to you, 2 companies that person apt made it onto your radar are Ares Capital Corporation (NASDAQ: ARCC) and AGNC Investment (NASDAQ: AGNC). These 2 companies boast awesome yields of much than 10%, but person precise antithetic concern models. Here's what you request to cognize if you're considering investing successful either of these high-yield dividend stocks.

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Comparing Ares Capital and AGNC Investment

Ares Capital Corporation is simply a concern improvement institution (BDC) that invests successful middle-market companies, chiefly done indebtedness and equity investments. In caller decades, banks person preferred lending to larger institutions, leaving middle-market companies behind. Ares Capital has recovered its niche successful lending to smaller companies, and has a dividend that yields 10%, a reflection of the riskiness of these loans.

AGNC Investment, connected the different hand, is simply a owe existent property concern spot (mREIT). Unlike accepted REITs, AGNC invests successful government-backed mortgage-backed securities. Since caller owe rates mean astir 6%, the institution uses leverage -- fundamentally borrowing -- to boost its returns capable truthful that it tin connection an charismatic dividend output of 13%.

Private recognition hazard has affected BDCs similar Ares Capital Corporation

Each institution has its ain unsocial risks. For Ares Capital Corporation, determination has been a ton of quality astir backstage recognition and BDCs. Notably, investors person grown acrophobic astir loans extended to bundle companies. These companies person taken a deed this twelvemonth amid concerns that artificial intelligence, notably agentic AI, could upend galore bundle companies' concern models that person done truthful good successful caller decades.

Amid this volatility, Ares Capital banal has fallen astir 20% from its 52-week high. The institution has sizable investments successful software, which marque up 24% of its full indebtedness portfolio. Management has noted that the loan-to-value connected its bundle publication is 37%, providing it with a ample cushion that could withstand large writedowns earlier it would impact Ares Capital.

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