Ares Capital Earned $0.50 a Share and Is Paying Out $0.48. How Thin Is That Dividend Cushion?

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Thin Dividend Cushion at Ares Capital Raises Flags

Ares Capital’s shrinking dividend cover highlights risk amid rising loan defaults and economic uncertainty.

Ares Capital’s recent earnings show it made $0.50 per share but pays out $0.48 in dividends, leaving a razor-thin buffer. While this might look good on the surface, their net investment income—which essentially funds the dividend—is heading downward from $2.28 in 2023 to a forecasted $2.02 in 2025. Couple this with a rise in non-performing loans to 2.4%, and you have a recipe for dividend pressure. For South African investors, the risk is less about ARCC itself and more about the US dollar strength versus the rand. If Ares cuts dividends, risk appetite for higher-yielding assets could fall, prompting USD/ZAR to rise as investors seek safer havens. The local financial shares like Standard Bank or Nedbank may see some impact if capital flows tighten. However, if the US economy avoids recession, the dividend could hold, keeping risk premiums in check. Either way, caution is warranted. this is just our opinion and not financial advice