Ares Capital: Growing Backlog Can Convert To Higher Earnings (Rating Upgrade)

Cain Lee 9.35K Followers Follow Summary Ares Capital is upgraded to a buy, trading at a rare sub-average premium to NAV and offering a 9.6% dividend yield. ARCC's $1.5B backlog, floating-rate portfolio, and new $1B commercial paper program position it well for a higher-rate environment. Portfolio diversification remains strong, with minimal AI/software risk and robust spillover income supporting distributions. While NAV has declined for three quarters, non-accruals and realized losses remain manageable, with earnings covering the dividend. ekinyalgin/iStock via Getty Images Overview It's been more than a year since I've covered Ares Capital ( ARCC ), so I wanted to revisit this business development company to reassess its outlook through the remainder of the year. During my last coverage, I This article was written by Cain Lee 9.35K Followers Follow Financial analyst by day and a seasoned investor by passion, I've been involved in the world of investing for over 15 years and honed my skills in analyzing lucrative opportunities within the market.I specialize in uncovering high quality dividend stocks and other assets that offer potential for long term-growth that pack a serious punch for bill-paying potential. I use myself as an example that with a solid base of classic dividend growth stocks, sprinkling in some Business Development Companies, REITs, and Closed End Funds can be a highly efficient way to boost your investment income while still capturing a total return that follows traditional index funds. I created a hybrid system between growth and income and manage to still capture a total return that is on par with the S&P. Analyst’s Disclosure: I/we have a beneficial long position in the shares of ARCC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.