Should You Buy Ares Capital Stock While It's Below $26?

Company Overview - Ares Capital is a business development company (BDC) that provides capital to middle-market companies with annual EBITDA between $10 million and$250 million, aiming to invest between $30 million and$500 million in debt and equity [2] - Traditional banks are often hesitant to lend to these riskier clients, allowing BDCs like Ares to fill this niche by offering higher-interest loans [3] Financial Performance - Ares Capital's stock has increased approximately 40% over the past decade, with a total return of nearly 260% when including reinvested dividends [1] - The company's debt-to-equity ratio has improved from 1.21 in 2021 to 0.99 in 2024, while net assets per share have increased from $18.96 in 2021 to$19.89 in 2024 [7] - Ares' stock is currently trading at a premium of about 15% to its net assets per share, which may limit near-term gains [7] Dividend Safety - In 2024, Ares generated core earnings per share (EPS) of $2.33 and paid out$1.92 per share in dividends, resulting in a forward yield of 8.3% [9] - Analysts project a 6% decline in core EPS to $2.19 per share in 2025, but the company is expected to cover its dividend payments comfortably [10] Market Position - Ares Capital has diversified its investments across 535 companies, with 63$26 price target in the near future [12] - Declining interest rates may reduce Ares' bottom-line growth but could enhance the attractiveness of its dividend compared to fixed-income investments [11]