Image Source: Pixabay

Ares Capital Corp (ARCC) is a United States-based closed-ended specialty finance 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 the investment made.

It focuses on business development investments in the 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 which also serves as corporate headquarters.

Three key data points gauge ARCC or any dividend-paying firm.

The key three are:

(1) Price

(2) Dividends

(3) Returns

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

ARCC Price

Over the past year, Ares’s share price increased just over 6.9% from $19.55 to $20.90 as of Monday’s market close.

If ARCC shares trade in the range of $18.00 to $25.00 this next year, its recent $20.90 share price might rise to $22.00 by next year. Of course, Ares’s price could also drop about the same $1.10 estimated amount or more.

My $1.10 upside is based on the median of one-year target estimates from thirteen analysts tracking ARCC for brokers.

ARCC Dividend

Ares Capital has paid quarterly dividends since January 2005. The most recent $0.48 Q dividend was declared May 1st for shareholders of record June 14th and the dividend was paid June 28th. A forward-looking $1.92 annual dividend yields 9.19% at Monday’s closing price.

ARCC Returns

To put it all together, a $3.02 estimated one-year gross gain per share shows up by adding Ares’s $1.92 annual dividend to the estimated price upside of $1.10.

A little over $1000 buys 48 shares at $20.90 per share.

A $10 broker fee (if charged), paid half at purchase and half at sale, might take $0.21 per share out of the $3.02 gross gain to reveal a net gain of $2.81 X 48 shares = $134.88 for about a 14% estimated net gain on the year.

Furthermore, the $91.90 annual dividend income from $1K invested is over 4.25 times greater than the $20.90 single share price. By these numbers, ARCC may be an ideal dividend dog.

You might choose to pounce on Ares Capital Corp. It is a 20-year-old dividend-paying California-based business development firm with a 19-year track record paying variable quarterly dividends.

The exact track of Ares's future price and dividend will entirely be determined by market action.

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

More By This Author:

Current Analysis: ANZ Group (ANZGF)
Current Analysis: Telenor (TELNY)
Current Analysis: Publicis Groupe