Ares Capital Stock Shows Strong Returns Amid Premium Valuation

Ares Capital's stock has risen 40% over 10 years, with a total return of nearly 260%. The stock trades near an all-time high but remains below Wall Street’s price target. Investors may consider this high-yield dividend opportunity before it reaches the estimated $26.

Date: 08-02-2025

AI Rating: 6

Earnings Per Share (EPS): Ares Capital's core EPS for 2024 is reported at $2.33, with a forward dividend payout of $1.92. Analysts anticipate a slight decline to $2.19 in 2025 as interest rates decrease, which could be a concern for investors focusing on income sustainability.

Debt-to-Equity Ratio: Ares Capital's debt-to-equity ratio has shown improvement, reducing from 1.21 in 2021 to 0.99 projected for 2024, indicating better financial health and potentially lower risk. This is a positive signal for long-term investors.

Net Assets Per Share: The company's net assets per share have increased from $18.96 in 2021 to a projected $19.89 in 2024, suggesting good management of its asset base. However, the stock trading at about 15% above its net assets indicates a premium valuation that could restrict immediate upside potential.

Summary: Investors should weigh the attractive dividend yield of over 8% against the declining EPS forecast and the premium price relative to net assets. While the positive trends in debt management and net assets are encouraging, the potential dip in EPS and overall valuation could reflect a trade-off between yield and growth prospects.

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