Ares Capital Corporation
🇺🇸 ARCC · NYSE/NASDAQ · US04010L1035
Bank
USD 18.90 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
10.2
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 18.90 ÷ 1.86 = 10.2
TTM period through: 2025-12-31
Forward P/E (estimated): 9.7
Based on analyst estimates
Reference: Provider P/E (Trailing): 11.6
Yield (Fwd)
10.16%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 10.22%
Div. Growth (5Y CAGR)
-24.9%
Net Debt/EBITDA (TTM)
6.9x
Latest quarter: 21.6x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-12-31
Latest quarter (2026-03-31): 21.6x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
103.3%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 20.6%
Cash Flow Payout (TTM): 23.5%
FCF Coverage (TTM): 4.26x
ROE
8.3%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
10.2x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
Ares Capital is the industry's leading business development company, offering essential corporate financing and a flawless 10-year dividend history. Recent cyclical pressures from interest rate expectations have pushed shares to an attractive 7.7% discount to Net Asset Value (NAV). Trading at $18.90, below our fair value estimate of $20.50 (NAV), this represents a highly compelling entry point for dividend investors seeking secure double-digit yields backed by exceptional cash flow coverage.
Sector Context
Ares Capital is a premier business development company (BDC) that provides essential financing to middle-market companies. Like REITs, BDCs are legally required to distribute over 90% of their taxable income to shareholders, making high accounting payout ratios normal, while the company's strong cash flow coverage reflects the true sustainability of the dividend.
Temporary Opportunity Identified
Cyclical concerns over potential interest rate cuts compressing loan yields and broader macroeconomic fears have temporarily depressed the valuation, pushing shares to an uncommon discount to NAV.
📊 Strategy Analysis
- • Trading at $18.90, shares offer an attractive 7.7% discount to the Net Asset Value (NAV) of $20.48, signaling a compelling valuation.
- • Exceptional free cash flow coverage (23.4% cash flow payout ratio) ensures the massive 10.2% yield remains highly secure, despite the legally required high earnings payout ratio.
- • Best-in-class management, flawless 10-year dividend history without cuts, and industry-leading scale provide a strong competitive moat in middle-market lending.
- • Conservative leverage with a Debt/Equity ratio of 1.13x, well below the statutory limit for BDCs, providing significant balance sheet safety.
⚠ What to Watch
- • High sensitivity to interest rate cycles, as anticipated Federal Reserve rate cuts could compress net investment income on its floating-rate loan portfolio.
- • Recent core quarterly EPS of $0.47 slightly lagged the $0.48 dividend, reflecting mild cyclical earnings pressure despite strong cash flow support.
- • A 5-year EPS CAGR of -12.0% highlights the ongoing macroeconomic volatility and structural challenges in corporate credit markets.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-05-16
Disclaimer: This information is for educational purposes only. Not financial advice.