Ares Capital‘s (NASDAQ:ARCC) The main draw is its monstrous dividend yield. At more than 10%, it is almost 10 times greater than the S&P 500The performance.
He business development company (BDC) has paid a stable to growing dividend for 67 consecutive quarters. It has endured a number of difficult times over the years, including last quarter. Here’s a look back at their difficult quarter and whether the high yield dividend stocks It’s still a purchase.
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a bad streak
Ares Capital’s core earnings fell in the first quarter to $0.47 per share, down from $0.50 per share in the fourth quarter and first quarter of last year. That pushed them below the BDC’s quarterly dividend level of $0.48 per share. Despite this, Ares announced its next dividend, payable at the end of June.
While the company faced some hurdles during the period, management did not seem too concerned. CEO Kort Schnabel opened the session quarterly conference call stating, “I believe we are off to a good start in 2026 with strong earnings and strong fundamental portfolio performance. Our core earnings of $0.47 per share represent an annualized ROE of 9.6% in what has historically been a seasonally slow quarter for originations.” It also noted that “increased capital market volatility, geopolitical uncertainty and net outflows of retail products exacerbated an already seasonally sluggish market period in the first quarter.”
On a more positive note, the CEO stated that “the overall quality of our portfolio remains healthy with continued low levels of non-performing loans and problem assets.” One factor driving that view is that Ares tested its software-focused portfolio companies to assess the risks of AI-related disruption. He hired a major consulting firm, which discovered that only a small fraction of his investment portfolio was medium to high risk.
What this means for the dividend
The CEO also talked about the dividend of the call. He noted that while core earnings fell below the dividend, when adding the $0.15 per share of net realized earnings it posted in the period, earnings were well above the payout, “providing a solid underlying basis for current distributions.” Additionally, the BDC has been carrying forward excess taxable profits. This excess earnings of $1.38 per share from last year provides further support to the dividend. Additionally, Ares Capital has modest leverage and continues to deliver credit performance in line with its historical track record.