Latest news with #BDCs
Business Wire
14 hours ago
- Business
- Business Wire
KBRA Releases Research – Private Credit: Business Development Company (BDC) Ratings Compendium: First-Quarter 2025
NEW YORK--(BUSINESS WIRE)--KBRA releases its Business Development Company Ratings Compendium, which looks at results for the quarter ended March 31, 2025. In 1Q25, business development companies (BDC) demonstrated continued resilience and caution amid an uncertain operating environment marked by high base rates, tighter spreads, and uncertain trade policies. The sector remains concentrated, with 10 BDCs holding 53% of the total market of $449.9 billion at fair value (FV) as of 1Q25. Despite continued low transaction volume in a muted mergers and acquisitions (M&A) environment, perpetual-life BDCs continued to raise equity. The top five perpetual-life BDCs represented approximately one-third of the total BDC sector investments at 1Q25, relatively unchanged from 4Q24. At the same time, several non-perpetual-life BDCs saw loan repayments outpace originations, resulting in modest net negative fundings. In this uncertain environment, BDCs remain cautious in underwriting new loans, while much of the new fundings were to existing portfolio companies. With interest rates remaining high and the broader economic picture unsettled, KBRA remains focused on signs of credit deterioration within BDC portfolios. While some increase in nonperforming loans is anticipated, the Sector Outlook remains Stable, reflecting a foundation of ample liquidity, conservative leverage practices, and portfolios concentrated in senior secured first lien positions. Portfolios remain focused on industries with relatively resilient fundamentals and limited exposure to proposed tariffs. This helps to insulate our rated BDCs from the more volatile effects of global trade and geopolitical developments. In the event of a broad economic slowdown, rated BDCs are generally well positioned to absorb increasing non-accruing loans. Key Sector Takeaways Perpetual BDCs Gaining Market Share: Perpetual non-traded BDCs continued to scale rapidly, supported by steady inflows from wealth management platforms and seed capital from sovereign wealth funds. Low leverage, solid credit quality focused almost exclusively on senior secured first lien loans, and strong asset coverage should allow for sustainability amid stressful economic conditions despite the rapid growth. Muted M&A Activity Suppresses Originations: Ongoing economic uncertainty, high base rates, and low valuations are dampening M&A activity, limiting opportunities for new loan originations. As a result, new originations in many BDCs have stemmed from new fundings for existing portfolio companies instead of new investments. These loans are to portfolio companies that have long histories with the BDC platform. Credit Performance Remains Manageable: Despite some deterioration in economically sensitive sectors like health care, credit quality across the BDC sector remained stable. Non-accrual levels held steady or improved at most firms, aided by asset sales and credit resolutions. Margin Compression Persists Despite Funding Innovation: Net investment income (NII) was mixed as higher interest expenses and tighter spreads compressed margins, although signs of stabilization are emerging, with banks retracting from the market in 1Q25. To stabilize NII margins, BDCs increasingly focused on liability management, issuing middle-market CLOs with tighter spreads, amending revolvers to improve funding terms and extend maturities, and hedging fixed rate unsecured debt issuances with interest rate swaps. Conservative Leverage and Ample Liquidity Bolster Resilience: KBRA-rated BDCs continue to exhibit caution, maintaining conservative leverage and allowing for excess credit availability and cash for increased liquidity, positioning them well against macro headwinds. Click here to view the report. About KBRA KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions. Doc ID: 1009799
Yahoo
22-05-2025
- Business
- Yahoo
Should You Buy Ultra-High-Yielding Ares Capital Corporation While It's Below $22.50?
Ares Capital Corporation offers a notable dividend yield of 8.7%, significantly higher than the S&P 500 index. The company lends to medium-sized companies often underserved by the banking system today. Ares Capital is the largest BDC in the U.S., and is well-positioned to capitalize on the market for private capital lending. 10 stocks we like better than Ares Capital › If you're looking for an easy way to boost your passive income, consider investing in dividend stocks. One standout dividend stock is Ares Capital Corporation (NASDAQ: ARCC). With a dividend yield of 8.7%, Ares Capital pays a dividend over seven times that of the S&P 500 index. Ares Capital plays a key role by providing loans to mid-sized businesses, which are overlooked by traditional banks. With a solid track record of navigating economic downturns, Ares has proven its ability to manage risks effectively. However, the stock has experienced some turbulence recently, amid market volatility stemming from economic uncertainty. If you're considering adding ultra-high-yielding Ares Capital to your portfolio, here's what you need to know first. Ares Capital operates as a business development corporation (BDC), an attractive investment structure for those seeking high-yield income. When set up as a Regulated Investment Company, BDCs must distribute at least 90% of their taxable income to shareholders, allowing investors to benefit directly from the corporation's profitability. Ares Capital specifically targets middle-market companies -- those with earnings before interest, taxes, depreciation, and amortization (EBITDA) ranging from $10 million to $250 million. These mid-sized companies often find themselves underserved by traditional banks, which may shy away from lending due to their smaller size and the perceived credit risks involved. In recent decades, the number of banks has declined significantly due to consolidation. Coupled with stricter regulations following the Great Recession, banks have shifted their focus toward larger businesses, which they deem to carry less risk and offer more liquid debt. As a result, banks' share of the senior secured loan market has plummeted, creating a lending opportunity for BDCs like Ares Capital. Another aspect that makes Ares Capital appealing for investors is its use of floating-rate loans, which adjust with changes in interest rates. As rates rise, so too can Ares' income, enabling the potential for increased dividend payments to investors. Managing debt within middle-market companies presents unique challenges that investors should be aware of. Unlike larger corporations, these companies often have less flexibility and may be more susceptible to risks, especially during times of economic uncertainty characterized by inflation, rising tariffs, and supply chain disruptions. One thing to watch is credit quality. Non-accrual loans are those where principal or interest payments are 30 days overdue or when there's substantial doubt regarding their collection. An uptick in this ratio could indicate increasing credit risk, but current data suggests stability in this area. Currently, loans in non-accrual status account for just 0.9% of Ares Capital's total investments at fair value, a slight improvement from 1% at the end of the previous quarter. One way Ares mitigates some of this risk is by investing in first-lien or second-lien senior secured loans, which account for 64% of its total loans. This positions it as one of the first creditors to be paid during liquidation events. It also has 566 companies in its portfolio, and its largest single investment is only 2% of its portfolio. For now, concerns over credit quality are muted, but it's also worth noting that the first quarter didn't reflect the effect of trade tariffs. Investors should continue to monitor this in upcoming quarters as tariffs work their way through the economy. Ares has a proven track record of success across different economic environments. Since its founding in 2004, the company has delivered excellent total returns (including reinvested dividends) of 12.9% annually -- outperforming the S&P 500 index along the way. Ares Capital Corporation is the largest BDC in the U.S. and has a 20-year lending history to middle-market companies. The company has extensive knowledge of key markets and industries and has invested $160 billion since its inception. With a total addressable market of $5.4 trillion and a longer-term shift to alternative investments like private capital lending, ultra-high-yielding Ares Capital Corporation is well-positioned to grow and capitalize on future opportunities. Before you buy stock in Ares Capital, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Ares Capital wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Should You Buy Ultra-High-Yielding Ares Capital Corporation While It's Below $22.50? was originally published by The Motley Fool
Yahoo
22-05-2025
- Business
- Yahoo
Should You Buy Ultra-High-Yielding Ares Capital Corporation While It's Below $22.50?
Ares Capital Corporation offers a notable dividend yield of 8.7%, significantly higher than the S&P 500 index. The company lends to medium-sized companies often underserved by the banking system today. Ares Capital is the largest BDC in the U.S., and is well-positioned to capitalize on the market for private capital lending. 10 stocks we like better than Ares Capital › If you're looking for an easy way to boost your passive income, consider investing in dividend stocks. One standout dividend stock is Ares Capital Corporation (NASDAQ: ARCC). With a dividend yield of 8.7%, Ares Capital pays a dividend over seven times that of the S&P 500 index. Ares Capital plays a key role by providing loans to mid-sized businesses, which are overlooked by traditional banks. With a solid track record of navigating economic downturns, Ares has proven its ability to manage risks effectively. However, the stock has experienced some turbulence recently, amid market volatility stemming from economic uncertainty. If you're considering adding ultra-high-yielding Ares Capital to your portfolio, here's what you need to know first. Ares Capital operates as a business development corporation (BDC), an attractive investment structure for those seeking high-yield income. When set up as a Regulated Investment Company, BDCs must distribute at least 90% of their taxable income to shareholders, allowing investors to benefit directly from the corporation's profitability. Ares Capital specifically targets middle-market companies -- those with earnings before interest, taxes, depreciation, and amortization (EBITDA) ranging from $10 million to $250 million. These mid-sized companies often find themselves underserved by traditional banks, which may shy away from lending due to their smaller size and the perceived credit risks involved. In recent decades, the number of banks has declined significantly due to consolidation. Coupled with stricter regulations following the Great Recession, banks have shifted their focus toward larger businesses, which they deem to carry less risk and offer more liquid debt. As a result, banks' share of the senior secured loan market has plummeted, creating a lending opportunity for BDCs like Ares Capital. Another aspect that makes Ares Capital appealing for investors is its use of floating-rate loans, which adjust with changes in interest rates. As rates rise, so too can Ares' income, enabling the potential for increased dividend payments to investors. Managing debt within middle-market companies presents unique challenges that investors should be aware of. Unlike larger corporations, these companies often have less flexibility and may be more susceptible to risks, especially during times of economic uncertainty characterized by inflation, rising tariffs, and supply chain disruptions. One thing to watch is credit quality. Non-accrual loans are those where principal or interest payments are 30 days overdue or when there's substantial doubt regarding their collection. An uptick in this ratio could indicate increasing credit risk, but current data suggests stability in this area. Currently, loans in non-accrual status account for just 0.9% of Ares Capital's total investments at fair value, a slight improvement from 1% at the end of the previous quarter. One way Ares mitigates some of this risk is by investing in first-lien or second-lien senior secured loans, which account for 64% of its total loans. This positions it as one of the first creditors to be paid during liquidation events. It also has 566 companies in its portfolio, and its largest single investment is only 2% of its portfolio. For now, concerns over credit quality are muted, but it's also worth noting that the first quarter didn't reflect the effect of trade tariffs. Investors should continue to monitor this in upcoming quarters as tariffs work their way through the economy. Ares has a proven track record of success across different economic environments. Since its founding in 2004, the company has delivered excellent total returns (including reinvested dividends) of 12.9% annually -- outperforming the S&P 500 index along the way. Ares Capital Corporation is the largest BDC in the U.S. and has a 20-year lending history to middle-market companies. The company has extensive knowledge of key markets and industries and has invested $160 billion since its inception. With a total addressable market of $5.4 trillion and a longer-term shift to alternative investments like private capital lending, ultra-high-yielding Ares Capital Corporation is well-positioned to grow and capitalize on future opportunities. Before you buy stock in Ares Capital, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Ares Capital wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Should You Buy Ultra-High-Yielding Ares Capital Corporation While It's Below $22.50? was originally published by The Motley Fool
Business Insider
18-05-2025
- Business
- Business Insider
Seeking Up to 13% Dividend Yield? B. Riley Suggests 2 Dividend Stocks to Buy
Whether the markets are rallying or retreating, income investors often look beyond the headlines to find reliability – and that's where Business Development Companies, or BDCs, come in. These firms are structured to return capital to shareholders, often through substantial dividend payouts supported by steady investment income. For those seeking high yields, BDCs can offer a solid combination of predictability and income-generating power. Confident Investing Starts Here: Quickly and easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter These companies specialize in providing credit to small and mid-sized private businesses that often fall outside the reach of traditional lenders. In return, BDCs generate interest income – most of which is returned to shareholders in the form of dividends. And thanks to their floating-rate loan portfolios, many BDCs are well-positioned to benefit in higher-rate environments. Analyst Sean-Paul Adams of B. Riley sees opportunity here, pointing to two BDCs with high-yield dividend payouts – one as high as 13%. We used the TipRanks platform to see how the rest of Wall Street views these names. Let's take a closer look. Trinity Capital First up is Phoenix-based Trinity Capital, an alternative asset manager with a global footprint and $2.1 billion in assets under management at the end of Q1 this year. The company acts as a business development corporation, and makes private capital available to smaller firms that may have difficulty entering the traditional banking system. Trinity typically works with emerging growth-oriented client firms as a provider of venture debt and equipment financing; since its founding, Trinity has made available $4.3 billion in such funding. Trinity works across five distinct verticals: tech lending; life sciences; equipment finance; sponsor finance; and asset-based lending. The company vets its investment targets carefully and selects them to ensure that Trinity shareholders receive solid returns on their own investments. The results of this strategy can be seen in Trinity's long-term return data. The company has paid out consistent or increased dividends in each of the last 21 quarters, and since its 2021 IPO, the company has paid out a total of $337 million in cumulative dividend distributions. The company's most recent dividend was paid out on April 15, at a rate of 51 cents per common share. This marked the fifth quarter in a row with the dividend at that rate. The annualized payment of $2.04 per common share gives a forward yield of 13.8%. That dividend is supported by Trinity's investment and lending activities. At the start of 1Q25, the company had $125.6 million invested in 19 existing portfolio companies; by the end of the quarter, Trinity had added $94.8 million worth of investments in 6 additional companies. Trinity realized a total investment income of $65.4 million from this activity, a total that was up 30% year-over-year, although it missed the forecast by $2.5 million. At the bottom line, Trinity's GAAP net investment income of 52 cents per share was 13 cents better than expectations – and it fully covered the above-noted dividend. For B. Riley analyst Adams, in his coverage of this stock, the key point is Trinity's success in building its business model. He believes the company will continue to build value for investors, and writes, 'We believe the company's differentiated venture focus, strong risk-adjusted yields, and continued momentum in the pace of originations and platform growth provide meaningful upside potential in the near term.' Based on this stance, Adams rates Trinity as a Buy, with a $16 price target that points toward a one-year upside potential of 8%. Add in the dividend yield, and the total one-year return may reach ~22%. Overall, there are 6 recent analyst reviews on record for TRIN shares, and their breakdown – 4 Buys, 1 Hold, and 1 Sell – gives the stock its Moderate Buy consensus rating. The shares are priced at $14.84 and have an average price target of $15.83, implying a 7% increase for the year ahead. (See TRIN stock forecast) Sixth Street Specialty Lending Next on our list is Sixth Street Specialty Lending. This firm is a finance company, offering a combination of credit and financial services to middle-market private enterprises. These are the companies that have for decades been in the driver's seat of the American economy, but they cannot operate without access to reliable capital and credit. Sixth Street exists to help meet that need – and in doing so, to generate profits and returns for its own investors. Sixth Street focuses on US-domiciled firms as its client base, and since it started operations in 2011 the company has originated an aggregate of approximately $47.5 billion in loan principal. These loans generate current income for Sixth Street, while providing support for its clients. Sixth Street's portfolio is composed mainly of direct origination senior secured loans, but also includes mezzanine and unsecured loans, as well as corporate bond and equity security investments. The bulk of this portfolio, 97%, bears floating-rate interest, which helps to hedge the portfolio against inflation. At the end of 1Q25, this specialty lender's portfolio boasted a fair value of $3.412 billion, a sum that was spread across 115 portfolio companies. Sixth Street's return from these investments was summed up in the quarterly financial release, which showed that in 1Q25 the company saw a total investment income of $116.3 million, down slightly from the $117.8 million figure reported in 1Q24. The company's bottom line net investment income came to 62 cents per share. That net investment income was more than sufficient to cover the company's declared dividend in full. On April 30, Sixth Street declared a base quarterly dividend of 46 cents per share, for Q2, to be paid on June 30; in addition, the company declared a supplemental variable dividend for Q1, of 6 cents per share to be paid on June 20. The base dividend gives an annualized rate of $1.84 and a forward yield of 8.3%; with the supplement, the total 52-cent dividend annualizes to $2.08 and gives a forward yield of 9.3%. Sixth Street has been paying dividends since 2011, and has been providing supplementary payments since 2017. Turning again to Adams and the B. Riley view, we find the analyst impressed with Sixth Street's reliable returns. He writes of the stock, 'TSLX continues to deliver consistent ROEs with a conservative earnings outlook. We believe the company's disciplined approach to both sponsor and non-sponsor originations positions it well across market environments, given the large downtick in sponsor deal flow in the space.' To this end, Adams rates TSLX as a Buy, and he complements his rating with a $23 price target that implies a 12-month gain of just 1.37%. Together with the base dividend yield, this brings the total potential one-year return to ~11%. To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.
Yahoo
12-04-2025
- Business
- Yahoo
Is Ares Capital Stock a Buy Now?
If you're searching for a reliable income stream from your investment portfolio, Ares Capital (NASDAQ: ARCC) is one stock that should be on your radar. With an enticing dividend yield of 9.5%, it's hard to ignore. However, Ares Capital hasn't escaped the turbulence of the recent stock market fluctuations. Since the beginning of February, its stock has fallen nearly 16% from its peak. This recent dip could be an excellent buying opportunity for investors looking to boost their income. However, before you snap up shares, consider the following. Ares Capital Corporation is a business development corporation (BDC) that provides financing to middle-market companies -- those with earnings before interest, taxes, depreciation, and amortization (EBITDA) ranging from $10 million to $250 million. BDCs like Ares Capital are appealing to investors seeking income due to their unique tax structure. Legally, these companies must distribute at least 90% of their taxable income to shareholders. This allows the company to avoid federal income taxes, which are passed through to investors. As a result, BDCs can offer high dividend yields that are very appealing for income-focused investors. Ares Capital has an advantage because banks have retreated from providing loans to middle-market companies. Over the past several decades, the number of banks has fallen drastically due to consolidation. During that time, the four largest banks acquired 40 regional banks that previously serviced middle-market companies. Add in regulations due to the fallout of the Great Recession, and banks have focused on lending to larger companies whose debt is seen as less risky and more liquid. Lending to middle-market companies can be a double-edged sword. BDCs use leverage to boost shareholder returns, which can magnify losses during tough economic times. One way to measure this is the debt-to-equity ratio, which compares the company's total liabilities to shareholder equity. Because BDCs rely heavily on external financing, it's important for investors to consider how much leverage they are using. The good news for Ares Capital investors is that its debt-to-equity ratio is quite low, at 0.96, and below the industry average of 1.05. In comparison, PennantPark Investment Corp., which boasts a higher dividend yield, has one of the highest debt-to-equity ratios of any BDC at 1.63. Ares Capital's performance is also closely tied to economic conditions, which could impact the credit quality of its portfolio companies. For example, economic slowdowns could result in reduced consumer spending and tighter credit conditions. If its portfolio companies experience difficulties, they could have trouble repaying their loans, ultimately hurting Ares Capital's bottom line. For this reason, credit quality and portfolio diversification are important components of the company's strategy. To mitigate some of these risks, 64% of Ares' loan portfolio consists of first-lien or second-lien senior secured loans, positioning it as one of the first creditors in line to be paid during liquidation events. Not only that, but it has 550 companies in its portfolio, and its largest single investment is only 2% of its portfolio. Ares Capital is the largest BDC in the U.S. and has a 20-year lending history to middle-market companies. The company has extensive knowledge across key markets and regions and has invested $160 billion since its inception. With a total addressable market of $5.4 trillion and a longer-term shift to private capital lending, Ares continues to find ample opportunities. Ares has a proven track record of success across different economic environments. Since its founding in 2004, the company has delivered excellent total returns (including reinvested dividends) of 12.3% annually. For investors in search of passive income, Ares Capital is an excellent high-yielding dividend stock to buy today. Before you buy stock in Ares Capital, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Ares Capital wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $509,884!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $700,739!* Now, it's worth noting Stock Advisor's total average return is 820% — a market-crushing outperformance compared to 158% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 5, 2025 Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Is Ares Capital Stock a Buy Now? was originally published by The Motley Fool
