Track market-moving stories before they get noisy

In the latest trading session, Ares Capital (ARCC - Free Report) closed at $19.70, marking a -1.7% move from the previous day. The stock trailed the S&P 500, which registered a daily loss of 0.58%. Elsewhere, the Dow saw a downswing of 1.18%, while the tech-heavy Nasdaq depreciated by 0.32%.

The stock of private equity firm has risen by 0.3% in the past month, leading the Finance sector's gain of 0.23% and the S&P 500's loss of 0.36%.

Market participants will be closely following the financial results of Ares Capital in its upcoming release. In that report, analysts expect Ares Capital to post earnings of $0.48 per share. This would mark a year-over-year decline of 4%. Simultaneously, our latest consensus estimate expects the revenue to be $780.31 million, showing a 0.22% drop compared to the year-ago quarter.

For the entire fiscal year, the Zacks Consensus Estimates are projecting earnings of $1.91 per share and a revenue of $3.1 billion, representing changes of -4.98% and +1.7%, respectively, from the prior year.

It's also important for investors to be aware of any recent modifications to analyst estimates for Ares Capital. Recent revisions tend to reflect the latest near-term business trends. Consequently, upward revisions in estimates express analysts' positivity towards the business operations and its ability to generate profits.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. Ares Capital currently has a Zacks Rank of #3 (Hold).

Digging into valuation, Ares Capital currently has a Forward P/E ratio of 10.51. This denotes a premium relative to the industry average Forward P/E of 8.38.

The Financial - SBIC & Commercial Industry industry is part of the Finance sector. This industry currently has a Zacks Industry Rank of 89, which puts it in the top 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow ARCC in the coming trading sessions, be sure to utilize Zacks.com.

I love investing in stocks with a combination of an impressive dividend growth track record, strong growth momentum and runway, an attractive current yield, and a solid underlying business model. I detail two such companies that recently dipped sharply. I also discuss why these discounts exist.

Ares Capital (ARCC - Free Report) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.

Over the past month, shares of this private equity firm have returned +0.2%, compared to the Zacks S&P 500 composite's -0.1% change. During this period, the Zacks Financial - SBIC & Commercial Industry industry, which Ares Capital falls in, has gained 2.7%. The key question now is: What could be the stock's future direction?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Earnings Estimate RevisionsHere at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For the current quarter, Ares Capital is expected to post earnings of $0.48 per share, indicating a change of -4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $1.91 points to a change of -5% from the prior year. Over the last 30 days, this estimate has remained unchanged.

For the next fiscal year, the consensus earnings estimate of $1.94 indicates a change of +2% from what Ares Capital is expected to report a year ago. Over the past month, the estimate has remained unchanged.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Ares Capital is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Revenue Growth ForecastEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of Ares Capital, the consensus sales estimate of $780.31 million for the current quarter points to a year-over-year change of -0.2%. The $3.1 billion and $3.19 billion estimates for the current and next fiscal years indicate changes of +1.7% and +2.6%, respectively.

Last Reported Results and Surprise HistoryAres Capital reported revenues of $768 million in the last reported quarter, representing a year-over-year change of +3.1%. EPS of $0.47 for the same period compares with $0.5 a year ago.

Compared to the Zacks Consensus Estimate of $768.98 million, the reported revenues represent a surprise of -0.13%. The EPS surprise was 0%.

Over the last four quarters, Ares Capital surpassed consensus EPS estimates times. The company topped consensus revenue estimates just once over this period.

ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Ares Capital is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom LineThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Ares Capital. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

Certain high-yield investments quietly hand thousands of dollars to the IRS every single year, and most investors holding them in taxable accounts have never stopped to calculate exactly how much they are surrendering before reinvesting a single cent.

A $500,000 basket of business development companies (BDCs) and midstream master limited partnerships (MLPs) currently throws off roughly $42,000 in ordinary income every year. At the 24% federal bracket, that hands the IRS about $10,080 annually before you touch a share. Inside a Roth, that same $10,080 stays in the account, reinvested, tax-free, permanently.

Tax Delta: Roth Versus Taxable at 24%
All four names below distribute non-qualified income taxed at ordinary rates in a taxable account. That is why they sit at the top of any Roth placement queue. The blended yield on an equal-weight basket clears 8%, well above the 6% headline threshold, even though one name individually sits slightly below.

1. Enterprise Products Partners (NYSE:EPD | EPD Price Prediction) is an MLP yielding 5.76% on its $2.24 annualized distribution. The Q2 payout rose to $0.56 per unit, extending a steady step-up cadence. Roth placement shelters the ordinary portion of the distribution and eliminates the K-1 reporting burden inside the account.

2. MPLX (NYSE:MPLX), also an MLP, yields 7.38% on a $4.306 annualized distribution. Management has committed to 12.5% distribution growth through 2027, which stacks tax-free compounding on top of a rising cash yield when held in a Roth.

3. Ares Capital (NASDAQ:ARCC) is a BDC yielding 9.63% on its $1.92 annualized dividend. CEO Kort Schnabel pointed to “17 years of stable or increasing regular quarterly dividends”. BDC distributions are taxed as ordinary income, making the Roth wrapper the highest-value shelter available.

4. Blue Owl Capital (NYSE:OBDC) is a BDC yielding approximately 11% on its $1.24 annualized base distribution. Q2 adjusted net investment income of $0.34 per share covered the $0.31 base dividend, and CEO Craig Packer cited “healthy dividend coverage” with leverage at a two-year low of 1.11x.

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Run the numbers on the basket at $500,000 equal weight:

Gross income: approximately $42,000
Taxable account net at 24%: approximately $31,920
Roth net: $42,000
Annual Roth advantage: $10,080
10-year advantage before reinvestment: $100,800

Bracket Multiplier: Same Portfolio, Different Tax Bill
The Roth advantage scales directly with your bracket. Same $42,000 in gross ordinary distributions:

Bracket
Annual Tax
Net Income
Roth Advantage

22%
$9,240
$32,760
$9,240

24%
$10,080
$31,920
$10,080

32%
$13,440
$28,560
$13,440

37%
$15,540
$26,460
$15,540

A 37% bracket holder loses over $5,000 more per year to federal tax than a 22% holder on the identical positions. That is before state tax.

Compounding Insight Most Investors Miss
The Roth advantage compounds annually. That $10,080 gets reinvested at the portfolio yield every year for the rest of your holding period. Held flat and reinvested at the basket’s blended yield, the 10-year cumulative advantage runs materially above the simple $100,800 figure, and the 20-year figure roughly doubles again. Frame it as the permanent tax leakage you accept every year you leave these positions in a taxable account, and the reason a dividend ladder built to live off the checks without ever selling a share works so much harder inside a Roth than outside one.

Note that ARCC non-accruals ticked up to 2.4% at amortized cost and OBDC non-accruals rose to 2.8%, both from lower prior-quarter levels. Distribution coverage matters at these yields, and lower base rates continue to pressure BDC spread income.

Concrete Actions

Pull your current holdings of ARCC, OBDC, or any BDC or MLP and multiply the annualized distribution by your bracket. That figure is your annual tax leakage. Do it before your next filing.
Model a phased Roth conversion starting with the highest-yield ordinary-income names first (BDCs before midstream MLPs), where the tax delta per dollar is largest.
Compare the one-time conversion tax on the specific dollar amount against the multi-year compounded Roth advantage at your bracket before assuming the conversion cost is too high.

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Contact [email protected] for any questions or corrections.

Some of the highest-yielding dividend stocks on the market carry a hidden cost that erases thousands of dollars every single year, and the bracket you sit in determines just how severe that damage gets.

At the 24% federal bracket, a $500,000 portfolio built around mortgage REITs, BDCs and net-lease REITs throws off enough ordinary-income distributions to hand the IRS roughly $13,000 every year in a taxable account. Inside a Roth, that number goes to zero.

The five names below sit at the top of the tax-drag list because almost none of their payouts qualify for the preferential 15% or 20% dividend rate. They flow through as ordinary income taxed at your full marginal rate.

Roth Versus Taxable: $500,000 Delta at 24% Here is what a $500,000 equal-weighted portfolio ($100,000 in each name) produces at current yields:

AGNC Investment (NASDAQ:AGNC | AGNC Price Prediction): agency mortgage REIT paying 12 cents monthly, yielding 13.15%. Agency MBS mREITs distribute almost entirely non-qualified ordinary dividends, the textbook Roth candidate. Annaly Capital Management (NYSE:NLY): mortgage REIT that raised its quarterly payout to 75 cents from 70 cents, yielding 12.34%. Same ordinary-income tax character as AGNC. Ares Capital (NASDAQ:ARCC): the largest publicly traded BDC, paying 48 cents quarterly, yielding 9.65%. BDC distributions flow through almost entirely as ordinary interest income at the investor’s full marginal rate. MidCap Financial Investment (NASDAQ:MFIC): BDC paying 31 cents quarterly on a $1.24 forward annualized rate, roughly 12.8% at recent prices. Ordinary income treatment, plus management has flagged the payout as not guaranteed. Realty Income (NYSE:O): net-lease REIT paying 27 cents monthly on a $3.252 annualized rate, yielding 5.22%. Section 199A helps at the margin, but distributions remain largely ordinary. Blended portfolio yield lands near 10.6%, producing roughly $53,000 in gross annual income. In a taxable account at 24%, that becomes about $40,280 after tax. Inside a Roth, the same portfolio delivers the full $53,000. Annual Roth advantage: about $12,720. Straight-line 10-year delta with no reinvestment: about $127,200.

Bracket Multiplier: 22% to 37% Same $53,000 gross portfolio income, different brackets:

Bracket Tax Cost Net in Taxable Annual Roth Advantage 22% $11,660 $41,340 $11,660 24% $12,720 $40,280 $12,720 32% $16,960 $36,040 $16,960 37% $19,610 $33,390 $19,610 A 37% bracket holder pays roughly $8,000 more per year in tax on this exact portfolio than a 22% bracket holder. That gap widens every year the position stays outside a Roth.

Compounding Cost Most Readers Miss The $12,720 annual Roth advantage at 24% compounds year after year. Inside a Roth, that dollar stack reinvests tax-free every year the position is held. Straight-line, without reinvestment, the 10-year delta on this portfolio is roughly $127,200 and the 20-year delta is roughly $254,400. Reinvested inside the Roth at even a conservative 5% return assumption on the delta itself, both figures push materially higher, and every dollar of that growth stays tax-free on withdrawal. That is the permanent cost of holding these five specific names in the wrong account, and it is exactly why the low-tax window between your last paycheck and your first RMD matters so much (we sized up that window in a free Roth conversion guide here).

What to Do Now 1. If you hold AGNC, NLY, ARCC, MFIC, or O in a taxable account, run the tax cost at your bracket against the current yield before your next quarterly estimated payment. The numbers above are the template.

2. Model a phased Roth conversion starting with the highest-yielding, most ordinary-income-heavy names first. In this group that means the two mortgage REITs and the two BDCs, ahead of Realty Income.

3. For new capital going into any BDC or mortgage REIT position, route the contribution to the Roth side of the account structure by default. The bracket multiplier only gets more expensive as ordinary income rises.

Contact [email protected] for any questions or corrections.

Beacon Pointe Advisors LLC purchased a new position in Ares Capital Corporation (NASDAQ:ARCC – Free Report) in the 2nd quarter, according to its most recent filing with the Securities and Exchange Commission. The firm purchased 580,351 shares of the investment management company’s stock, valued at approximately $10,754,000. Beacon Pointe Advisors LLC owned approximately 0.08% of Ares Capital at the end of the most recent reporting period.

A number of other large investors also recently bought and sold shares of the business. Orion Capital Management LLC purchased a new stake in shares of Ares Capital in the 2nd quarter worth approximately $25,000. Glenview Trust Co bought a new position in Ares Capital during the 2nd quarter valued at approximately $337,000. Empowered Funds LLC purchased a new position in Ares Capital during the second quarter valued at $708,000. United Capital Financial Advisors LLC bought a new stake in Ares Capital in the second quarter worth $1,506,000. Finally, Dearborn Partners LLC bought a new stake in Ares Capital in the second quarter worth $222,000. 27.38% of the stock is owned by hedge funds and other institutional investors.

Ares Capital Price Performance Shares of NASDAQ:ARCC opened at $19.95 on Friday. The company has a market capitalization of $14.32 billion, a P/E ratio of 14.78 and a beta of 0.56. Ares Capital Corporation has a 1-year low of $17.40 and a 1-year high of $22.51. The firm’s 50 day simple moving average is $19.10 and its two-hundred day simple moving average is $18.84. The company has a debt-to-equity ratio of 1.14, a current ratio of 1.28 and a quick ratio of 1.28.

Ares Capital (NASDAQ:ARCC – Get Free Report) last released its earnings results on Wednesday, July 29th. The investment management company reported $0.47 earnings per share for the quarter, meeting analysts’ consensus estimates of $0.47. The company had revenue of $768.00 million for the quarter, compared to analysts’ expectations of $770.19 million. Ares Capital had a net margin of 30.91% and a return on equity of 9.80%. During the same quarter in the previous year, the company earned $0.50 EPS. Research analysts expect that Ares Capital Corporation will post 1.91 EPS for the current fiscal year. Ares Capital Announces Dividend The firm also recently declared a quarterly dividend, which will be paid on Wednesday, September 30th. Shareholders of record on Tuesday, September 15th will be issued a dividend of $0.48 per share. The ex-dividend date of this dividend is Tuesday, September 15th. This represents a $1.92 dividend on an annualized basis and a yield of 9.6%. Ares Capital’s dividend payout ratio (DPR) is currently 142.22%.

Analyst Upgrades and Downgrades Several equities analysts have recently weighed in on ARCC shares. Wall Street Zen downgraded Ares Capital from a “hold” rating to a “sell” rating in a report on Sunday, August 2nd. Weiss Ratings reiterated a “hold (c)” rating on shares of Ares Capital in a research note on Tuesday, June 9th. Truist Financial cut their price objective on shares of Ares Capital from $22.00 to $21.00 and set a “buy” rating on the stock in a research report on Thursday, July 30th. Wells Fargo & Company restated an “equal weight” rating and set a $19.00 price objective (down from $20.00) on shares of Ares Capital in a research note on Friday, June 12th. Finally, Keefe, Bruyette & Woods decreased their target price on shares of Ares Capital from $21.00 to $20.00 and set an “outperform” rating for the company in a report on Thursday, July 30th. Eight analysts have rated the stock with a Buy rating and three have assigned a Hold rating to the company. According to MarketBeat, Ares Capital currently has an average rating of “Moderate Buy” and a consensus price target of $20.40.

Check Out Our Latest Analysis on Ares Capital

About Ares Capital (Free Report)

Ares Capital Corporation (NASDAQ: ARCC) is a publicly traded business development company (BDC) that specializes in providing debt and equity financing solutions to U.S. middle-market companies. As a BDC, Ares Capital offers investors access to a diversified portfolio of tailored credit investments, including senior secured loans, unitranche financing, mezzanine debt and equity co-investments. The firm’s flexible capital structures are designed to support companies seeking growth capital, refinancing or strategic acquisitions.

Through its credit platform, Ares Capital focuses on originations, underwriting and portfolio management across a range of industries, with a particular emphasis on sectors such as healthcare, technology, industrials and business services.

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When RMDs force your hand and an annuity feels like surrender, a $940,000 IRA creates a surprisingly specific math problem with a solution most retirees never consider.

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Three years into required minimum distributions, a 76-year-old retiree needs his IRA to do one very specific job. It has to throw off $6,700 a month, which comes to $80,400 a year, without eating into principal during a rough market and without handing the whole balance over to an insurance company. The account holds $940,000, and the RMD schedule is already forcing withdrawals, so the real goal is to make those distributions cover the required withdrawals instead of selling shares to meet them.

The math here is brutally simple. Divide your income target by your yield, and that tells you how much capital you need. At $80,400 of annual income, here is what each yield tier actually demands.

Conservative Tier: 3% to 4% Yield Broad dividend growth funds, blue-chip dividend aristocrats, and total-market index yields sit here. To generate $80,400 at 3.5%, the math says $80,400 divided by 0.035 equals roughly $2,297,000 in capital. That is more than double this retiree’s balance. Principals tend to appreciate, distributions grow with earnings, and sequence-of-returns risk is muted. Sleep-at-night quality, but out of reach at $940,000 unless the income target drops sharply.

Moderate Tier: 5% to 7% Yield This is high-yield blue-chip equity, preferred shares, REITs, and covered-call equity funds. At 6%, $80,400 divided by 0.06 equals $1,340,000. Still $400,000 short.

Altria (NYSE:MO | MO Price Prediction) anchors this tier. Shares are around $69, the forward payout is $4.44 annualized after the latest hike to $1.11 quarterly, and the yield sits near 6.5%. Altria has raised the payout in a straight line from $0.86 in 2021 to $1.11 today, and its beta of 0.50 means it does not whipsaw the account balance. The catch is well documented: declining cigarette volumes, negative book value, and Altria’s own 14 P/E hint at how the market prices the terminal risk.

Aggressive Tier: 8% to 14% Yield Business development companies, closed-end bond funds, mortgage REITs, and leveraged credit vehicles live here. At roughly 9%, $80,400 divided by 0.0855 equals $940,000. That is precisely this retiree’s balance.

The allocation cited above splits the account into 35% ARCC, 35% MO, and 30% PDI. Ares Capital (NASDAQ:ARCC) pays $0.48 quarterly, $1.92 annualized, yielding roughly 10% on a $20 share price. Management reported core earnings of 47 cents against the 48-cent dividend, $988 million ($1.38 per share) of spillover income, and non-accruals of 2.4% at cost, well below the BDC historical average. PIMCO Dynamic Income Fund (NYSE:PDI) pays $0.2205 monthly, roughly 17% on a $15 price. The blended yield lands north of the 9% needed, providing a modest cushion.

The costs here are real, as one fund is a leveraged closed-end vehicle with a history of irregular year-end distributions and a one-year price decline of about 9%. Another saw its net asset value slip to $19.35 per share, down $0.24 from the previous quarter. Sheltering all three inside the IRA is the smart tax move, since BDC and CEF distributions would otherwise hit ordinary-income rates at the 22% or 24% federal bracket that most retirees find themselves in once RMDs start.

What Most Readers Miss About Yield A 3.5% dividend growing 8% a year doubles the income stream in roughly nine years. A frozen 10% distribution stays at 10% forever, then loses ground to inflation. On this $940,000 account, a hypothetical growth-tilted portfolio starting at $32,900 of annual income would surpass a static $80,400 stream within a dozen years. The retiree three years into RMDs generally does not have that runway, which is why the aggressive tier fits the situation (the payment calendar, the withdrawal order, and the mix are laid out in our free Paycheck Portfolio Method guide). A 55-year-old asking the same question should answer it differently.

Three Actions Reprice the target. Pull the actual spending number from bank statements. If real outflows are $5,200 rather than $6,700, the required yield drops to roughly 7%, and the portfolio can shift toward Altria and away from PDI, materially cutting NAV-erosion risk. Stress-test the RMD. Overlay the IRS Uniform Lifetime factor for age 76 against distribution income. If cash yield exceeds the RMD, reinvest the excess; if it lags, plan which position to trim before the December deadline. Model the ten-year total return. Compare a 3.5% dividend-growth ETF against this 8.5% blended sleeve using historical NAV plus distributions. The compounding gap tells the real cost of buying current income. Contact [email protected] for any questions or corrections.

Ares must pay out more than 90% of its taxable income as dividends. Rising interest rates will make it even easier to cover those payments.

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At the 24% federal bracket, a $50,000 stream of ordinary dividend income hands roughly $12,000 to the IRS every year. That bill repeats annually, indefinitely, for as long as the positions sit in a taxable account. The cleanest way to keep all of it is to hold high yield, ordinary income payers inside a Roth IRA, where the same checks arrive untaxed.

One verification note before the math. Two of the four names below currently clear the 8% bar. Ares Capital (NASDAQ:ARCC | ARCC Price Prediction) yields 9.6%. JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) runs near the 8% distribution yield disclosed in its fund story. British American Tobacco (NYSE:BTI) currently yields 5.81% after a 53% five year run in the share price and Enterprise Products Partners (NYSE:EPD) yields 4.52%.

All four share the trait that drives this article: distributions taxed at ordinary income rates outside a Roth.

The Tax Delta: Roth Versus Taxable Anchor the engine math first. A $500,000 position in a stock yielding 8% generates $40,000 in annual gross income. At the 24% bracket, the taxable account version nets $30,400 after federal tax. Inside a Roth, it nets the full $40,000. The annual Roth advantage on that single position is $9,600, every year, before any state tax stacks on top.

Now layer the names. ARCC’s $0.48 quarterly distribution, JEPI’s variable monthly option premium payouts ranging from 29 cents to 61 cents per share, BTI’s 8-cent quarterly declarations and EPD’s 55-cent quarterly distribution all hit a 1099 as ordinary income in a brokerage account.

Inside a Roth, they hit nothing.

The Four Names, Ranked by Roth Priority 1. ARCC: The largest publicly traded business development company. BDC distributions are non-qualified and taxed at the holder’s marginal rate, which makes this the cleanest Roth candidate in the list. Q1 2026 core EPS of 47 cents against a 48-cent dividend is a thin coverage gap worth tracking, but the yield character is the priority.

2. JEPI: Option premium from a written out-of-the-money S&P 500 call overlay is treated as ordinary income at the holder’s marginal rate. With trailing 12-month distributions totaling $5.18241 per share, this is exactly the cash flow that loses the most to taxes in a brokerage.

3. BTI: A U.K.-domiciled payer. Foreign withholding cannot be reclaimed inside a Roth, so the shelter is partial rather than absolute, and the yield currently sits in the mid single digits rather than above 8%.

4. EPD: A master limited partnership with a 27-year distribution growth streak. The caveat is real: MLP distributions held in an IRA can generate Unrelated Business Taxable Income above $1,000, which becomes taxable inside the Roth. EPD is not a clean Roth candidate at large allocations.

The Bracket Multiplier Hold the $40,000 gross constant. The IRS take scales linearly with the bracket.

Federal Bracket Tax Cost as % of Gross Verified Annual Roth Advantage (on $40K gross) 22% 22% Lower than the 24% anchor 24% 24% $9,600 32% 32% Materially higher than the 24% anchor 37% 37% Highest urgency for Roth placement The takeaway: The higher the bracket, the more aggressive the case for sheltering ordinary income payers first.

The Insight Most Readers Miss The annual delta understates the long-term impact. Reinvested tax free, the $9,600 annual advantage at the 24% bracket compounds inside the Roth at the portfolio’s reinvestment rate every year. Stretched across 10 and 20 year holding windows at a conservative reinvestment assumption, the cumulative gap between Roth and taxable on these same four names runs into six figures on the $500,000 base. That is a permanent cost of taxable placement, separate from any price appreciation.

What To Do If you hold ARCC or JEPI in a taxable account, calculate the annual tax cost at your bracket before your next filing. Run Roth conversion math on these specific names before assuming the conversion cost outweighs the long-term income delta. For EPD and other MLPs, check UBTI exposure before placing them in a Roth, and phase any conversions starting with the ordinary dividend names first. Contact [email protected] for any questions or corrections.

Ares Capital (ARCC +1.99%) is likely to be most attractive to income investors, given its lofty 9.9% dividend yield. To put that into perspective, the yield of the S&P 500 index (^GSPC +0.62%) is a tiny 1%. That said, a yield that high comes with risks that have to be fully understood. Which is why it is important for investors to consider the business development company's (BDC's) second-quarter results in a larger context.

How did Ares Capital do in the second quarter? Ares Capital began its second-quarter earnings update by announcing the third-quarter dividend: $0.48 per share. That's the same level that has been paid since the fourth quarter of 2022. So it wasn't a particularly shocking update. But the BDC's net investment income was $0.50 per share, leaving only a two-cent cushion for the dividend.

Image source: Getty Images.

In the first quarter, the business development company generated $0.55 per share of net investment income. The key takeaway is that this number moves around a little bit, so you need to look at a longer time period before making a call on Ares Capital's dividend-paying ability.

For example, in 2025, Ares Capital's net investment income totaled to $2.02 per share while it paid out $1.92 in dividends. During the year, net investment income ranged between $0.58 per share and $0.48 per share on a quarterly basis. Clearly, the board isn't deciding the dividend based on one quarter's results. Still, that doesn't mean that investors shouldn't be worried.

Looking at the longer-term net investment income trend That said, looking back to 2023 changes the dynamic a little bit. The company has paid the same $1.92 per share in annual dividends since that year. However, in 2023, the net investment income totaled $2.28 per share. In 2024, the company reported that net investment income dipped slightly to $2.25 per share, which still suggested ample dividend safety. But in 2025, net investment income fell to $2.02 per share. That's cutting things a lot closer, making the first half of 2026 a bit more troubling. Investors should be paying closer attention.

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20.01

Still, through the first half of 2025, the company generated $1.03 per share in net investment income, compared with $1.05 per share in the first half of 2026. From that perspective, the BDC's results are improving.

The bigger risk is a recession What is likely to be more important in the near term is the quality of the company's loan portfolio. The bad news is that non-accrual loans inched up to 2.4% of the portfolio in the second quarter, from 1.8% at the start of the year. The good news is that 2.4% isn't a terrible number. However, dividend risk appears to be rising here, and a recession, which would likely increase the number of non-accrual loans and reduce net investment income, could easily force the company to consider a dividend cut, given the drop in dividend coverage from 2023.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Ares Capital has been gradually declining for many quarters now. ARCC is my largest BDC position, and I continue adding regularly. Q2 results were great with stable non-accruals, great net investment income compared to peers, and above-average dividend coverage.

This article is focused on retirees and income investors who want to generate both a passive income and decent capital appreciation. The income is important for retirees, but they should not overlook the capital growth to meet or beat inflation to support at least 30 years of retirement. We present a portfolio of 10 funds that is highly diversified with nearly as many different industry segments. The portfolio offers a 7% plus yield and roughly $6,000 monthly income.

Key Takeaways ARCC reported Q2 core EPS of $0.47 and emphasized selective underwriting in a slower market.ARCC originated $2.6B in investment commitments, with 68% in first-lien senior secured loans.ARCC ended Q2 with approximately $6B in available liquidity after repaying $1B of unsecured notes. Ares Capital Corporation (ARCC - Free Report) emphasized its scale, selective underwriting and balance sheet flexibility as management navigated a slower transaction environment in the second quarter of 2026.

Executives highlighted improving deal activity, disciplined capital deployment and stable dividend capacity while addressing credit normalization across the broader lending market.

ARCC Leans on Scale in Slower MarketManagement said that the quarter featured fewer completed transactions as sponsors and borrowers adjusted to a more uncertain macroeconomic backdrop. CEO and co-head of U.S. Direct Lending Kort Schnabel said that Ares reviewed more transactions as the quarter progressed, with June becoming one of the strongest months for opportunities reviewed in two years.

Schnabel noted that 75% of second-quarter transactions involved incumbent borrowers, reinforcing the importance of existing relationships. The company ended the period with 619 portfolio companies and continued focusing capital on opportunities wherein its scale provided stronger economics and terms.

Ares Capital reported core EPS of $0.47 for the second quarter, meeting the Zacks Consensus Estimate. Revenues of $768 million lagged the Zacks Consensus Estimate of $769 million.

Ares Capital Sees Better Lending TermsARCC highlighted improving conditions in parts of the lending market, particularly for larger middle-market transactions. President and co-head of U.S. Direct Lending James Miller said that competition has eased among larger lenders, allowing the company to achieve wider spreads, lower leverage levels and improved fees on new senior loan commitments.

The company originated $2.6 billion in new investment commitments during the quarter, with 68% allocated to first-lien senior secured loans. New senior loan commitments carried average spreads 20 basis points wider than in the fourth quarter of 2025, while upfront fees increased 50 basis points over the same period.

Management also pointed to stronger transaction momentum entering the second half. Ares Capital said that it had an investment backlog of $1.5 billion as of July 23, 2026, with additional opportunities under review.

ARCC Maintains Credit DisciplineCredit quality remained a central focus during the call. Schnabel said that portfolio performance remained healthy, with borrowers generating approximately 8% organic weighted average LTM EBITDA growth through the end of the quarter.

The company reported non-accruals at costs of 2.4% of total investments and 1.4% at fair value. Management said that these levels remained below historical BDC averages and emphasized the portfolio’s diversification and equity cushions.

During analyst questioning, a Wells Fargo analyst asked about broader credit normalization across the industry. Miller responded that the company viewed the trend as a maturation of portfolios after an extended period of unusually low credit losses, rather than a specific industry-driven issue.

Ares Capital Expands Balance Sheet FlexibilityCFO and Treasurer Scott Lem highlighted actions taken to strengthen funding flexibility. The company ended the quarter with approximately $6 billion in available liquidity after repaying $1 billion in unsecured notes, while maintaining net debt to equity of 1.12X.

Ares Capital raised $1.2 billion in additional financing during the quarter, including unsecured notes and increased commitments across secured revolving facilities. The company also launched a commercial paper program designed to provide access to lower-cost funding.

The company maintained its quarterly dividend outlook, declaring a third-quarter 2026 dividend of $0.48 per share. Management cited substantial spillover income and stable earnings generation as support for dividend capacity.

ARCC Addresses Investor ConcernsAnalysts focused on portfolio marks, potential industry consolidation and credit trends during the question-and-answer session. A JPMorgan analyst asked about opportunities for strategic transactions in the BDC sector, given performance differences among managers. Schnabel said that the dispersion in results could increase the potential for such activity but did not provide specific details.

A KBW analyst questioned trends in payment-in-kind structures. Miller said that PIK terms remained deal-specific and had received greater scrutiny, while noting that structurally originated PIK exposure remained around 90% of the portfolio.

Management also addressed software portfolio concerns, stating that AI-related risks remained limited overall and that software investments continued to show operating strength.

Ares Capital Focuses on Long-Term PositionARCC’s management maintained that its scale, capital access and underwriting discipline remain central to its strategy. Executives emphasized selective investing rather than pursuing volume in a slower market environment.

The company entered the second half with a focus on capturing improved lending opportunities, while maintaining portfolio quality, liquidity and dividend stability.

Zacks Rank & Style ScoresARCC currently carries a Zacks Rank #3 (Hold), indicating that the stock currently has a balanced outlook based on earnings estimate revisions. The Zacks Rank can change after quarterly results as analysts update their earnings expectations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has a Value Score of D, a Growth Score of F, a Momentum Score of D and a VGM Score of F. Zacks Style Scores evaluate value, growth and momentum characteristics, with higher grades indicating stronger attributes within each category.

Key Takeaways ARCC matched Q2 earnings estimates as higher expenses and unrealized losses weighed on results.Ares Capital's investment income rose on higher interest income and capital structuring service fees.ARCC made $2.59B in gross commitments and exited $2.92B as portfolio activity stayed robust. Shares of Ares Capital Corporation (ARCC - Free Report) lost 1.7% following the release of its second-quarter 2026 results. Core earnings of 47 cents per share met the Zacks Consensus Estimate. The bottom line fell 6% from the prior-year quarter.

The reported quarter’s results were primarily hurt by an increase in expenses. However, an increase in interest income from investments, along with higher capital structuring service fees, supported the results to an extent. Robust portfolio activity was another tailwind.

GAAP net income was $171 million or 24 cents per share, down from $361 million or 52 cents per share in the prior-year quarter. The decline was primarily due to a significant increase in net unrealized losses on ARCC’s investment portfolio. Net realized gains also deteriorated, swinging from a $34-million gain in second-quarter 2025 to a $5-million loss in second-quarter 2026.

ARCC’s Total Investment Income Improves, Expenses RiseTotal investment income was $768 million, up 3.1% year over year. This was driven by higher interest income from investments and capital structuring service fees, partly offset by lower dividend income and other income. The top line marginally lagged the Zacks Consensus Estimate of $769 million.

Total expenses were $401 million, up 1.5% from the prior-year quarter.

ARCC’s Portfolio Activities RobustIn the second quarter, the company made gross commitments worth $2.59 billion to new and existing portfolio companies compared with $2.57 billion in the prior-year quarter.

The company exited $2.92 billion of investment commitments in the reported quarter compared with $1.96 billion a year ago.

The fair value of Ares Capital’s portfolio investments was $29.35 billion as of June 30, 2026, down from the Dec. 31, 2025, value of $29.49 billion.

The fair value of accruing debt and other income-producing securities was $26.26 billion as of June 30, 2026.

Ares Capital’s Balance Sheet StrongAs of June 30, 2026, the company’s cash and cash equivalents totaled $383 million, plummeting from $638 million as of Dec. 31, 2025.

Ares Capital had $6.7 billion available for additional borrowings under the existing credit facilities as of June 30, 2026. Total outstanding debt was $15.9 billion.

As of June 30, 2026, total assets were $30.5 billion and stockholders’ equity was $13.9 billion.

Net asset value was $19.35 per share, down from $19.94 as of Dec. 31, 2025.

Our Take on ARCCDriven by the rise in demand for customized financing, growth in total investment income is expected to continue in the near term. However, the company’s expansion strategies may lead to a rise in costs in the near term. Regulatory constraints pose another major headwind.

Currently, ARCC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates & Expectations for ARCC’s PeersFS KKR Capital Corp. (FSK - Free Report) is slated to report quarterly numbers on Aug. 6.

Over the past seven days, the Zacks Consensus Estimate for FSK’s quarterly earnings has been unchanged at 41 cents.

Main Street Capital (MAIN - Free Report) is also scheduled to announce quarterly results on Aug. 6.

Over the past seven days, the Zacks Consensus Estimate for Main Street Capital’s quarterly earnings has been unchanged at $1.01.

Ares Capital (ARCC) Q2 2026 Earnings Call Transcript

3 High-Yield Dividend Stocks With Real Capital Gains Potential in 2026Ares Capital NASDAQ: ARCC reported second-quarter core earnings of $0.47 per share, unchanged from the prior quarter, while GAAP net income rose to $0.24 per share from $0.13 in the first quarter. Chief Executive Officer Kort Schnabel said the company’s core earnings represented an annualized return on equity of 9.7% and reflected healthy portfolio performance despite subdued market activity.

The business development company said its portfolio continued to show organic weighted-average last-12-month EBITDA growth of about 8%, in line with its 10-year average. Schnabel said interest coverage, leverage and revolving-credit-facility utilization among portfolio companies remained near historical averages, while borrowers maintained average equity cushions of more than 50% below Ares Capital’s investments.

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Portfolio and Credit Performance Maximize Your Returns: 3 Dividend Stocks With Yields Over 5%Ares Capital ended the quarter with investments totaling $29.7 billion at cost and a portfolio valued at $29.3 billion at fair value, down slightly from $29.5 billion in the first quarter. Chief Financial Officer Scott Lem attributed the change principally to mark-to-market valuation adjustments and net repayment activity.

Net asset value was $13.9 billion, or $19.35 per share, down $0.24 per share sequentially. Lem said the company has increased NAV per share by more than 30% since inception while paying stable dividends.

3 Dividend-Yielding Stocks Too Cheap to Pass UpNon-accrual investments represented 2.4% of the portfolio at cost and 1.4% at fair value at quarter-end. President Jim Miller said the cost-based non-accrual rate remained below the company’s approximately 3% historical average since the global financial crisis and below an approximately 4% historical average for the BDC industry over the same period.

Management expects industry credit conditions to continue normalizing toward longer-term averages, though it said performance differences among managers have widened. Schnabel said Ares Capital added four investments to non-accrual during the quarter, but the companies were in unrelated businesses and did not indicate a sector-specific trend.

In response to questions about challenged portfolio companies, Schnabel said the company’s preference is for sponsors to provide additional capital and work with lenders rather than for Ares Capital to take control of businesses. He said the company is prepared to take control when necessary and views that capability as a competitive advantage.

Origination Activity and Market Conditions Ares Capital originated $2.6 billion of new investment commitments during the quarter across 20 industries and 38 sub-industries. About 75% of transactions involved existing borrowers, which management said demonstrated the value of its incumbent borrower and sponsor relationships.

While overall market transaction activity remained muted, Schnabel said Ares reviewed more than 25% more transactions than in the prior quarter. June was one of the company’s strongest months for transactions reviewed in the past two years, and management said the increased activity continued into July.

Miller said new senior loan commitments during the quarter carried average spreads 20 basis points wider than in the fourth quarter of 2025, while average upfront fees were 50 basis points higher. He said market terms had improved, particularly in the upper middle market, where fewer lenders have the scale to compete for larger transactions.

Schnabel said Ares Capital’s closing ratio was moderately below its historical average of roughly 5%, reflecting continued selectivity amid lower-quality deal flow earlier in the quarter. Management said it has recently seen deal quality improve alongside rising transaction volume.

The company said it committed to a nearly $2 billion credit facility during the second quarter, initially providing the full commitment before reducing its position. Schnabel said the ability to underwrite commitments of that size can create opportunities for higher fees and economics.

Management also said interest-rate volatility can be more disruptive to deal activity than the absolute level of rates, because buyers and sellers face more difficulty modeling financing costs under a wide range of potential rate outcomes.

Software and AI Exposure Schnabel said Ares Capital’s software investments continued to produce organic EBITDA growth above the broader portfolio average during the second quarter. The company has one small software loan on non-accrual and said its software debt investments have loan-to-value ratios in the low 40% range.

The company reiterated that its independent review of software-oriented portfolio companies found limited overall AI-related risk. Less than 50 basis points of the portfolio’s fair value was attributed to software investments considered higher AI risk, while less than 4% was attributed to medium or higher AI risk investments. Management said companies classified as medium risk were performing in line with the overall portfolio.

Liquidity, Funding and Dividend Ares Capital reported debt-to-equity leverage, net of available cash, of 1.12 times at quarter-end, effectively unchanged from the first quarter. The company had about $6 billion of available liquidity after repaying $1 billion of unsecured notes in July, Lem said.

During the quarter, the company completed approximately $1.2 billion of additional financing, including $800 million of unsecured notes and about $370 million of incremental commitments across two secured revolving credit facilities. It also launched what management described as the BDC sector’s first commercial paper program, with up to $1 billion of capacity.

Lem said commercial paper could lower funding costs by roughly 50 to 100 basis points compared with the company’s average secured borrowings at current market levels. The company made its first issuance under the program after the quarter ended and expects to use a few hundred million dollars of capacity initially.

The company declared a regular third-quarter dividend of $0.48 per share, payable Sept. 30 to shareholders of record Sept. 15. Ares Capital has paid stable or increasing regular quarterly dividends for 68 consecutive quarters, according to Lem. The company estimated taxable income spillover available for future distributions at approximately $988 million, or $1.38 per share.

About Ares Capital (NASDAQ:ARCC)Ares Capital Corporation NASDAQ: ARCC is a publicly traded business development company (BDC) that specializes in providing debt and equity financing solutions to U.S. middle-market companies. As a BDC, Ares Capital offers investors access to a diversified portfolio of tailored credit investments, including senior secured loans, unitranche financing, mezzanine debt and equity co-investments. The firm's flexible capital structures are designed to support companies seeking growth capital, refinancing or strategic acquisitions.

Through its credit platform, Ares Capital focuses on originations, underwriting and portfolio management across a range of industries, with a particular emphasis on sectors such as healthcare, technology, industrials and business services.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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Ares Capital (ARCC - Free Report) came out with quarterly earnings of $0.47 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.5 per share a year ago. These figures are adjusted for non-recurring items.

A quarter ago, it was expected that this private equity firm would post earnings of $0.48 per share when it actually produced earnings of $0.47, delivering a surprise of -2.08%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

Ares Capital, which belongs to the Zacks Financial - SBIC & Commercial Industry industry, posted revenues of $768 million for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.13%. This compares to year-ago revenues of $745 million. The company has topped consensus revenue estimates just once over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Ares Capital shares have lost about 5.9% since the beginning of the year versus the S&P 500's gain of 8.5%.

What's Next for Ares Capital?While Ares Capital has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Ares Capital was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.48 on $787.58 million in revenues for the coming quarter and $1.90 on $3.12 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - SBIC & Commercial Industry is currently in the bottom 35% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Horizon Technology Finance (HRZN - Free Report) , another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 4.

This investment company is expected to post quarterly earnings of $0.13 per share in its upcoming report, which represents a year-over-year change of -53.6%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Horizon Technology Finance's revenues are expected to be $25.23 million, up 2.9% from the year-ago quarter.

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Business development companies (BDCs) remain one of the most efficient income vehicles in public markets, and August is shaping up to be a constructive month to lean into the space. BDCs are required to distribute roughly 90% of taxable income to shareholders, which is why headline yields routinely sit in double digits. Those distributions are generally taxed as ordinary income, so BDCs typically work best inside tax-advantaged accounts.

With the Fed’s rate path finally stabilizing and lending spreads widening again, the strongest BDC balance sheets are positioned to deploy capital at more favorable terms than they saw a year ago. Here are three names worth a serious look this month, each attacking the middle-market lending opportunity from a different angle.

Ares Capital (ARCC) Ares Capital (NASDAQ:ARCC | ARCC Price Prediction) is the anchor holding for anyone building a BDC sleeve. It is the largest publicly traded BDC by scale, with a portfolio spanning 603 companies and $29.48 billion in fair value. At a recent price of $19.10, the stock trades at a modest discount to NAV per share of $19.59, and the 48-cent quarterly dividend translates to a trailing yield of roughly 10.05%.

Q1 2026 delivered core EPS of 47 cents and net investment income of $398 million (55 cents per share), with 91% of new commitments in floating-rate debt and 95% carrying interest rate floors. That structure protects income if short rates drift lower. CEO Kort Schnabel framed the setup this way on the last call: “We are off to a strong start to 2026 with solid core earnings, continued healthy portfolio performance and borrower fundamentals, and low levels of non-accruing investments.” Sell-side sentiment is aligned, with 11 of 14 analysts rating shares Buy or Strong Buy and an average price target of $20.73.

The risk: Non-accruals ticked up to 2.1% at amortized cost from 1.8%, and Q1 booked $412 million in net unrealized losses. Dividend coverage is tight when core EPS runs below the payout, so credit trends deserve close monitoring.

Trinity Capital (TRIN) Trinity Capital (NASDAQ:TRIN) is the growth engine of this trio. The venture-lending specialist finances equipment loans, growth-stage debt, and select equity co-investments, and its 15.8% effective yield on debt investments is the highest of the three by a wide margin. Shares recently changed hands at $15.13 and the stock has ripped 24.73% year to date on strong originations and expanding managed-fund fees.

Trinity pays a 17-cent monthly dividend, with a yield of 11.56%. Q1 2026 was the fundamental proof point: EPS of 53 cents, total investment income of $90.13 million (up 37.8% year over year), and net investment income covering the dividend at 103.9%. The firm also carries $68.5 million in undistributed spillover income, which functioned as a buffer for the $0.9844 special distribution paid in June. CEO Kyle Brown captured the operating momentum plainly: “Trinity Capital delivered a strong first quarter, increasing earnings per share while maintaining consistent credit quality.”

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The risk: Venture lending carries higher default variability than sponsor-backed middle-market debt. NAV slipped to $13.27, and Trinity raised $78.4 million through ATM issuances in Q1, so share dilution is a persistent overhang if premium-to-NAV compresses.

Golub Capital BDC (GBDC) Golub Capital BDC (NASDAQ:GBDC) is the deep-value pick. Shares trade at $12.96, well below NAV of $14.35, and the 33-cent quarterly dividend yields roughly 11.11%. The playbook here is disciplined: Senior-secured first-lien lending with a 26% software concentration and 89% of the book graded in the top two internal performance tiers.

Management is putting the discount to work. Golub repurchased 2.2 million shares at an average price of $12.43, roughly 84% of NAV, which is directly accretive to book value. With $1.4 billion in liquidity and a declining weighted average cost of debt of 5.2%, the balance sheet is built for opportunistic capital deployment. Oppenheimer maintains an Outperform rating with a $14 price target, and the Alpha Vantage consensus target sits at $13.75.

The risk: The board cut the base dividend from 39 cents to 33 cents this year, and fiscal Q2 delivered adjusted NII per share of 34 cents against $124.5 million of net unrealized depreciation. If spread compression continues, the reset payout could face another test.

Putting the Trio Together Each name plays a distinct role. Ares delivers scale and consistency, Trinity brings the highest yield and growth kicker and Golub offers a discounted senior-secured book with buybacks doing the heavy lifting on NAV. Watch non-accrual trends, spread direction and dividend coverage ratios into the next round of earnings reports. Those three signals will tell investors whether the double-digit yields on offer today are the setup for a strong second half or the market’s warning shot.

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Contact [email protected] for any questions or corrections.

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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.

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A $36,000 annual income works out to $3,000 a month, roughly what the average Social Security check delivers. It is also the exact income a $400,000 investment can throw off at a 9% yield, the sweet spot where business development company ETFs live. The real question is what you give up to get it.

The Yield Tiers for a $36,000 Income The formula is the same at every yield level: annual income divided by yield equals the capital you need. Higher yield means less capital and more risk. Lower yield means more capital and more durability.

Conservative tier (3 to 4%). $36,000 divided by 0.035 is roughly $1,030,000. This is broad-market dividend growth territory: quality large caps, dividend aristocrat funds, and diversified equity income ETFs. The 10-year Treasury alone is paying 4.6%, so 3.5% dividend equity should come with meaningful capital appreciation and payout growth on top.

Moderate tier (5 to 7%). $36,000 divided by 0.06 equals $600,000. This is covered call ETFs, preferred shares, midstream energy, and mainstream REITs. Distributions are higher but growth flattens, and inflation slowly grinds down real purchasing power.

Aggressive tier (8 to 14%). $36,000 divided by 0.09 equals $400,000, the headline scenario. Push to 12% and the requirement drops to $300,000. This is where BDC ETFs live, and where principal risk becomes real.

What $400,000 in BDC ETFs Actually Buys Putnam BDC Income ETF (NYSEARCA:PBDC) is an actively managed BDC-of-BDCs with an expense ratio of 0.13%. Its trailing 12-month distributions totaled $3.05433 per share against a recent price of roughly $26. The forward annualized estimate has slipped to $2.784, and shares are down 15% over the past year.

ETRACS Wells Fargo BDC ETN (NYSE:BDCZ) is an unsecured note issued by UBS, not an ETF, meaning holders take UBS credit risk on top of the underlying BDC exposure. It trades near $15 with a trailing 12-month distribution of $1.7509, and shares are down 14% over the past year.

Ares Capital (NASDAQ:ARCC | ARCC Price Prediction), the largest single BDC and PBDC’s top holding, pays a $0.48 quarterly dividend at a share price of almost $19.

What Default Risk Really Looks Like Default risk in a BDC portfolio shows up quarter by quarter in non-accruals: loans that have stopped paying interest. At Ares Capital, best-in-class in this sector, non-accruals climbed from 1.7% at year-end 2024 to 1.8% through most of 2025 and then to 2.1% at amortized cost in Q1 2026. Net unrealized losses widened to $412 million from $63 million a year earlier, and NAV per share slipped to roughly $20 from just under $20.

Yields on underlying loans are compressing too, from 11.1% at year-end 2024 to 10.3% in Q1 2026, largely because the Fed funds rate has come down to 3.75% and roughly 72% of the portfolio is floating rate. CEO Kort Schnabel called it “solid core earnings, continued healthy portfolio performance and borrower fundamentals, and low levels of non-accruing investments”, and the trend line for credit is up while the trend line for yield is down.

The Compounding Argument Most Buyers Skip A 9% BDC yield that stays flat pays $36,000 in year one and $36,000 in year ten, minus whatever principal has eroded. A 3.5% dividend growth portfolio that raises payouts 7% annually starts at roughly $36,050 on $1.03 million and doubles the income in about a decade, with the principal typically growing alongside it. At 9% you are renting income; at 3.5% you are building it.

PBDC distributions illustrate the point. The most recent quarterly payment was $0.696, down from $0.8251 in December 2025. That distribution cut already happened.

Three Steps Before You Commit Capital Pull the last five years of non-accrual rates and NAV per share for any BDC or BDC fund you own. If non-accruals are rising and NAV is falling, the current distribution yield is being subsidized by principal. Compare 10-year total return, not yield, between a broad dividend growth ETF and a BDC fund. Total return captures the compounding you actually keep. If you buy an ETN like BDCZ, size the position for issuer default. UBS credit risk is separate from the BDC index it tracks, and unsecured notes recover cents on the dollar in a bankruptcy. Contact [email protected] for any questions or corrections.

Ares Capital (ARCC - Free Report) closed at $18.61 in the latest trading session, marking a -1.33% move from the prior day. This change lagged the S&P 500's 1.21% loss on the day. On the other hand, the Dow registered a loss of 0.97%, and the technology-centric Nasdaq decreased by 2.15%.

The private equity firm's shares have seen an increase of 5.66% over the last month, surpassing the Finance sector's gain of 2.12% and the S&P 500's gain of 0.42%.

The investment community will be paying close attention to the earnings performance of Ares Capital in its upcoming release. The company is slated to reveal its earnings on July 29, 2026. It is anticipated that the company will report an EPS of $0.47, marking a 6% fall compared to the same quarter of the previous year. Meanwhile, the latest consensus estimate predicts the revenue to be $768.95 million, indicating a 3.22% increase compared to the same quarter of the previous year.

Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $1.9 per share and revenue of $3.12 billion, indicating changes of -5.47% and +2.16%, respectively, compared to the previous year.

Investors should also pay attention to any latest changes in analyst estimates for Ares Capital. These latest adjustments often mirror the shifting dynamics of short-term business patterns. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability.

Our research reveals that these estimate alterations are directly linked with the stock price performance in the near future. To capitalize on this, we've crafted the Zacks Rank, a unique model that incorporates these estimate changes and offers a practical rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 0.21% downward. Ares Capital presently features a Zacks Rank of #4 (Sell).

Digging into valuation, Ares Capital currently has a Forward P/E ratio of 9.91. Its industry sports an average Forward P/E of 7.99, so one might conclude that Ares Capital is trading at a premium comparatively.

The Financial - SBIC & Commercial Industry industry is part of the Finance sector. At present, this industry carries a Zacks Industry Rank of 204, placing it within the bottom 18% of over 250 industries.

The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.

Wall Street expects a year-over-year decline in earnings on higher revenues when Ares Capital (ARCC - Free Report) reports results for the quarter ended June 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.

The earnings report, which is expected to be released on July 29, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.

While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise.

Zacks Consensus EstimateThis private equity firm is expected to post quarterly earnings of $0.47 per share in its upcoming report, which represents a year-over-year change of -6%.

Revenues are expected to be $768.95 million, up 3.2% from the year-ago quarter.

Estimate Revisions TrendThe consensus EPS estimate for the quarter has been revised 0.52% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts.

Price, Consensus and EPS Surprise

Earnings WhisperEstimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How Have the Numbers Shaped Up for Ares Capital?For Ares Capital, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -3.85%.

On the other hand, the stock currently carries a Zacks Rank of #4.

So, this combination makes it difficult to conclusively predict that Ares Capital will beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that Ares Capital would post earnings of $0.48 per share when it actually produced earnings of $0.47, delivering a surprise of -2.08%.

The company has not been able to beat consensus EPS estimates in any of the last four quarters.

Bottom LineAn earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

Ares Capital doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.

Expected Results of an Industry PlayerAres Capital (ARCC - Free Report) , another stock in the Zacks Financial - SBIC & Commercial Industry industry, is expected to report earnings per share of $0.47 for the quarter ended June 2026. This estimate points to a year-over-year change of -6%. Revenues for the quarter are expected to be $768.95 million, up 3.2% from the year-ago quarter.

The consensus EPS estimate for Ares Capital has been revised 0.5% lower over the last 30 days to the current level. However, a lower Most Accurate Estimate has resulted in an Earnings ESP of -3.85%.

This Earnings ESP, combined with its Zacks Rank #4 (Sell), makes it difficult to conclusively predict that Ares Capital will beat the consensus EPS estimate. The company could not beat consensus EPS estimates in any of the last four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Ares Capital (ARCC +0.63%) currently yields just over 10%. That's about 10 times higher than the S&P 500.

At that rate, investing $5,000 into the business development company's (BDC) stock would generate a little more than $500 a year in passive income. That's, of course, if Ares Capital can maintain its current dividend rate. Here's a look at the sustainability of its high-yielding payout.

Image source: Getty Images.

Getting tighter, but not a concern yet Ares Capital has an excellent dividend track record. The BDC has paid a stable or growing regular dividend for over 16 consecutive years. That's impressive in the BDC space, as many of its peers have had to cut their payouts over the years due to falling earnings.

There's some concern about the sustainability of Ares Capital's dividend, given the recent decline in its core earnings. The BDC reported $0.47 per share of core earnings in the first quarter, down from $0.50 per share in the fourth quarter and year-ago period. As a result, core earnings fell short of the $0.48-per-share quarterly dividend.

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However, that doesn't mean a payout cut is forthcoming. Ares Capital also reported $0.15 per share of realized gains in the first quarter. Add that to core earnings, and its combined income was more than enough to cover the payout. Further, the BDC has built up a sizable cushion of spillover income from excess earnings carried over from last year ($1.38 per share). Additionally, the company highlighted several other factors on its first-quarter call that point to continued dividend stability and growth. It has modest leverage, the interest rate environment is stabilizing, and its portfolio's current credit performance aligns with its historical track record.

Given all these factors, a $5,000 investment in Ares Capital should generate $500 in dividend income over the next year. While it's a higher-risk dividend stock that investors will need to monitor more closely, it has the potential to continue paying at or above its current annual dividend rate for the foreseeable future.

Matt DiLallo has positions in Ares Capital. The Motley Fool has positions in and recommends Ares Capital. The Motley Fool has a disclosure policy.

Posted by _ _xnake on Jul 17th, 2026

Palmer Square Capital BDC (NYSE:PSBD – Get Free Report) and Ares Capital (NASDAQ:ARCC – Get Free Report) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, analyst recommendations and earnings.

Profitability This table compares Palmer Square Capital BDC and Ares Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets Palmer Square Capital BDC -26.82% 11.01% 4.14% Ares Capital 37.30% 9.85% 4.59% Analyst Recommendations This is a summary of recent recommendations and price targets for Palmer Square Capital BDC and Ares Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score Palmer Square Capital BDC 1 4 0 0 1.80 Ares Capital 0 3 8 0 2.73 Palmer Square Capital BDC presently has a consensus price target of $10.75, indicating a potential upside of 7.18%. Ares Capital has a consensus price target of $20.60, indicating a potential upside of 7.24%. Given Ares Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Ares Capital is more favorable than Palmer Square Capital BDC.

Volatility & Risk Palmer Square Capital BDC has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, Ares Capital has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500.

Earnings and Valuation This table compares Palmer Square Capital BDC and Ares Capital”s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio Palmer Square Capital BDC $124.39 million 2.51 -$3.17 million ($1.04) -9.64 Ares Capital $3.05 billion 4.52 $1.30 billion $1.63 11.79 Ares Capital has higher revenue and earnings than Palmer Square Capital BDC. Palmer Square Capital BDC is trading at a lower price-to-earnings ratio than Ares Capital, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership 6.5% of Palmer Square Capital BDC shares are held by institutional investors. Comparatively, 27.4% of Ares Capital shares are held by institutional investors. 1.1% of Palmer Square Capital BDC shares are held by insiders. Comparatively, 0.5% of Ares Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 14.4%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 10.0%. Palmer Square Capital BDC pays out -138.5% of its earnings in the form of a dividend. Ares Capital pays out 117.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary Ares Capital beats Palmer Square Capital BDC on 11 of the 16 factors compared between the two stocks.

About Palmer Square Capital BDC (Get Free Report)

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.

About Ares Capital (Get Free Report)

Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.

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