Ares Capital Corp (ARCC) is a United States-based closed-ended specialty finance business development company. Its investment objective is to generate both current income and capital appreciation through debt and equity investments.

The company focuses on investing primarily in U.S. middle-market companies with investment opportunities as well as in larger companies. Its portfolio comprises of first lien senior secured loans, second lien senior secured loans, and mezzanine debt (subordinated unsecured loan), which may include equity components that are diversified by industry and sector.

The company may invest in preferred and common equity investments to a lesser proportion. Its revenue mainly consists of interest and dividend income received from its investments.

It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office.

The company has paid quarterly dividends since January 2005.

Three key data points gauge Ares Capital Corp or any dividend-paying firm.

The key three are:

(1) Price

(2) Dividends

(3) Returns

Those three basic keys best tell whether any company has made, is making, and will make money.

ARCC Price

Over the past year, Ares Capital Corp share price rose about 3.45% from $19.44 to $20.11 as of Friday’s market close.

If ARCC trades in the range of $17 to $22 this next year, its recent $20.11 share price might rise to $21.60 by next year. Of course, ARCC’s price could drop about the same $1.49 estimated amount, or more.

My annual upside estimate of $1.49 however, is in line with the median of one year target estimates from sixteen analysts tracking Ares for brokers.

ARCC Dividend

Ares Capital Corp has paid variable quarterly dividends since January, 2005. ARCC’s most recent Q dividend of $0.48 was declared December 31st to shareholders of record March 14th. The payout is to be made March 29th.  So there’s time to get this pending payment.

A forward looking $1.92 annual dividend yields 9.55% at Friday’s $20.11 share price.

ARCC Returns

To put it all together, add ARCC’s estimated annual dividend of $1.92 to the estimated price upside of $1.49 to find a $3.41 gross gain.

At Thursday’s $20.11 share price, a little over $1000 would buy 50 shares.

A $10 broker fee (if charged), paid half at purchase and half at sale, would cost us $0.20 per share.

Subtracting that likely $0.20 brokerage cost from the $3.41 gross gain produces a net gain of $3.21 X 50 shares = $160.50 for a 16.00% estimated net gain.

You might choose to pounce on Ares Capital Corp; the estimated $95.50 of annual dividend income from $1k invested is over 4.75 times greater than ARCC’s recent $20.11 single share price.

The exact track of Ares Capital Corp ongoing future price and dividend will be determined by market action.

Remember the true value of any stock is best realized through personal ownership of shares.

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