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Ares Capital's Dividend Sustainability Through The First Half Of 2020 (Includes Special Periodic Dividend Projection)

Published Tue, 16 Jul 2019 18:42:14 -0400 on Seeking Alpha

Author's Note: This article is a detailed analysis of Ares Capital Corp.'s (ARCC) dividend sustainability through the first half of 2020. I have performed this analysis due to the number of readers who have specifically requested such an analysis be performed on ARCC at periodic internals. For readers who just want the summarized conclusions/results, I would suggest scrolling down to the "Conclusions Drawn" section at the bottom of the article.
Focus of Article:
The focus of this article is to provide a detailed analysis with supporting documentation (via three tests) on the dividend sustainability of ARCC through the first half of 2020. This analysis will be provided after a brief overview of ARCC's regulated investment company ("RIC") classification per the Internal Revenue Code ("IRC"). The first test will focus on ARCC's net investment income ("NII"). This test will be termed "TEST 1". The next two tests will focus on ARCC's net investment company taxable income ("ICTI") and cumulative undistributed taxable income ("UTI"). These two tests will be termed "TEST 2" and "TEST 3".
Understanding the tax and dividend payout characteristics of ARCC will provide investors with an overall better understanding of the business development company ("BDC") sector as a whole. From reading this article, investors will better understand how a RIC per the IRC comes up with the company's current dividend per share rate and specific signs when an impending increase or decrease should... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
APOLLO INVESTMENT 16.78   14.2 1.18 1.80 10.73
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
NEWTEK BUSINESS SERVICES 22.91   0.0 0.00 2.32 8.09
SOLAR CAPITAL 20.87   12.4 1.69 1.64 7.93
OAKTREE STRATEGIC INCOME 8.10   19.8 0.41 0.62 7.51
GLADSTONE INVESTMENT 12.34   7.4 1.67 0.82 6.73
MEDLEY CAPITAL 2.61   0.0 -1.62 0.15 5.81
MAIN STREET CAPITAL 43.18   16.8 2.57 2.46 5.69
MEDLEY MANAGEMENT 3.38   0.0 -0.36 0.12 3.56