Better Dividend Stock: Ares Capital vs. Main Street Capital

Business improvement companies (BDCs) often marque enticing dividend banal investments. These entities indispensable administer 90% of their taxable income to shareholders to debar corporate-level taxes connected their income. As a result, astir BDCs wage charismatic dividends.

Ares Capital (NASDAQ: ARCC) and Main Street Capital (NYSE: MAIN) are 2 much the astir fashionable BDC stocks among income investors. Here's a look astatine which is the champion 1 to bargain for dividend income.

Ares Capital is the largest BDC. It had invested $28.7 cardinal crossed 587 portfolio companies arsenic of the extremity of the 3rd quarter. The bulk of its portfolio (71%) was elder secured loans. It chiefly invests successful middle-market companies (those with $100 cardinal to $1 cardinal successful yearly revenue), though Ares volition besides put successful companies with much than $1 cardinal successful revenue.

The institution is portion of the Ares franchise led by planetary alternative investment manager Ares Management. The BDC's genitor institution has astir $600 cardinal successful assets nether management crossed credit, real assets, private equity, secondaries, and different businesses. Ares Capital's narration with its genitor provides it with respective competitory advantages, including heavy relationships with recognition providers and an expanded woody flow.

Ares Capital presently pays a quarterly dividend of $0.48 per share, giving it a 9.4% yield astatine its caller stock price. The BDC has paid a unchangeable to expanding dividend for the past 16 years (it has maintained its existent complaint since precocious 2022). It has besides periodically paid an further supplemental dividend of its excess nett income (the past 1 was $0.03 per stock successful precocious 2022). Ares presently generates capable income to screen its dividend outgo ($0.57 per stock of GAAP nett income successful the 3rd 4th and $0.50 per stock of halfway earnings). The BDC is besides carrying guardant $1.26 per stock of excess taxable income from 2024, which gives its dividend adjacent more cushion.

Ares is in a beardown position to proceed expanding its concern portfolio. It secured $3.9 cardinal successful caller concern commitments crossed 35 caller and 45 existing portfolio companies successful the 3rd quarter, compared to $2.6 cardinal successful exited concern commitments during the aforesaid period. Ares besides raised implicit $1 cardinal successful caller indebtedness superior during the period, benefiting from its long-standing relationships with banks and organization superior providers.