Ares Capital Fell Enough to Push Its Yield Near 10%. Here's the Number That Actually Worries Me.
Ares Capital's non-accrual rate is rising.
Overview
Shares of Ares Capital (NASDAQ:ARCC) have fallen about 10% from their 52-week high ($22.51) to their current level of around $20 per share. That has pushed its dividend yield up near 10% (recently around 9.6%). Several factors have driven the slump, including rising interest rates, Ares' falling core earnings, and an uptick in non-accruals. That last number worries me a bit because it relies on receiving interest payments to pay its high-yielding dividend.
While the trend in non-accruals is concerning, it's not a major red flag yet, just something I plan to keep an eye on. Here's why it wouldn't make me sell the high-yielding business development company (BDC) stock just yet.
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Originally published at www.fool.com.