Private Credit Keeps Making Headlines. Is Ares Capital's Big Dividend Still Safe?
Ares Capital offers a 10% dividend yield, but investors need to tread carefully.
Private Credit Keeps Making Headlines. Is Ares Capital's Big Dividend Still Safe?
Overview
The main reason most investors own Ares Capital (NASDAQ: ARCC) is its massive 10% dividend yield. For reference, the S&P 500 index (SNPINDEX: ^GSPC) has a yield of just 1.1%. Before you buy this business development company (BDC), however, you need to step back and make sure you understand just how risky the dividend is.
If you are looking for a stock with a stable or even slowly growing dividend, you will be highly disappointed with Ares Capital. The dividend history here is very clear: Ares Capital's dividend rises and falls over time. There is zero reason to expect that to change in the future, with the stock generally following the dividend higher and lower. It all relates back to the company's core business model.
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Originally published at www.fool.com.
