Ares Capital(ARCC) ZACKS·2025-03-24 15:56Core Viewpoint - Ares Capital Corporation (ARCC) has experienced a 6% decline in stock price over the past month, underperforming the industry but faring better than peers like Amalgamated Financial Corp. (AMAL) and Hercules Capital, Inc. (HTGC) [1] Market Context - The recent market downturn is attributed to the ongoing tariff war and economic data indicating a slowdown in the U.S., alongside elevated inflationary pressures, creating market uncertainty [4] Investment Income Growth - Ares Capital has shown growth in total investment income, with a five-year compound annual growth rate (CAGR) of 14.4% from 2019 to 2024, despite a decline in 2020 [5] - The company originated gross investment commitments of 6 billion in 2023, and 26.7 billion across 550 portfolio companies, with significant allocations in software & services (24.5%) and healthcare equipment & services (12%) [9] Capital Distribution and Dividends - Ares Capital distributed 90% of its taxable income as dividends to maintain its regulated investment company status, with the last dividend hike of 11.6% occurring in 2022 [15] - The company has increased its dividend four times in the last five years, with an annualized growth rate of 5.45% and a payout ratio of 82% [16] Analyst Sentiments and Earnings Estimates - The Zacks Consensus Estimate for 2025 and 2026 earnings has been revised downward to 2.16, indicating a projected decline of 6.4% and 1.1% respectively [18][20] Expense Trends - Ares Capital has experienced a five-year CAGR of 16.6% in expenses due to higher interest and credit facility fees, with expectations of elevated expenses in the near term due to expansion efforts [22][23] Valuation Metrics - The company's price-to-book ratio (P/B) stands at 1.09X, higher than the industry average of 0.96X, indicating that the stock is trading at a premium [24]