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Ares Capital (ARCC) has been upgraded to a Zacks Rank #2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.
The Dividend Harvesting Portfolio outperformed the market this week, gaining profitability despite S&P 500 and Nasdaq declines, due to diversification and disciplined reinvestment. Forward annualized dividend income rose to $3,442.33, with an 8.36% portfolio yield and 39.55% ROI on $29,500 invested, emphasizing income growth over capital appreciation. Recent additions to VZ and ARCC leveraged high yields amid rate pressures; VZ is viewed as a utility-like necessity, and ARCC benefits from floating-rate exposure.
Generating nearly $100,000 a year in dividend income sounds impossible without a massive nest egg, but the capital you actually need swings wildly depending on where you invest and what risks you are willing to absorb.
Eight of the fourteen highest-yield 'Safer' Big BBB Dogs, including Suburban Propane, Verizon, and Realty Income, currently meet the dogcatcher ideal for buyable dividend value. Analyst 1-year targets project average net gains of 23.91% for the top ten BBB stocks, with risk/volatility 26% below the market average. Dividend safety is highlighted by positive free cash flow yields exceeding dividend yields for the 'safer' group, while eight names show negative free cash flow margins and are considered unsafe.
2 investment grade dividend stocks have sold off sharply even as their earnings climbed, but only one of them is a real bargain. One "deep-value" yield looks great on paper, but a new $2 trillion competitor and a quiet build-up of debt tell a different story. The other has been dumped for reasons that look worse than they are, which leaves a 5%+ yield backed by contracted cash flows.
BDCs trade at a steep discount, but the risks the bears talk about most may not be the ones that matter. One overlooked risk, hidden in loans made years ago, is already hurting several well-known names. Some of the most popular BDCs may be more exposed than their results suggest, and the moment of truth is getting closer.
Ares Capital offers a compelling >10% dividend yield and currently trades below book value, enhancing its income appeal. ARCC benefits from rising interest rates, as over 70% of its $30.5B investment portfolio is in floating-rate debt, outpacing its floating-rate liabilities. Dividend coverage is tight but expected to hold, supported by robust liquidity and a strong track record of reliable payouts.
Every so often, the market hands investors high-yielding opportunities on a platter after throwing out the baby with the bathwater. I detail why I think there are certain BDCs that this applies to right now. I discuss the specifics of what I am looking for as well as some of my top picks of the moment.