Ares Capital Corporation’s (ARCC) Dividend Growth Story: What Sets This BDC Dividend Stock Apart

Ares Capital Corporation (NASDAQ:ARCC) is included among the 11 Best BDC Stocks to Buy Now.

Ares Capital Corporation (NASDAQ:ARCC) is set up as a business development company, which basically means it steps in where traditional lenders stop lending. These are businesses that might be too small or too risky for banks, so Ares fills that gap — and charges a higher rate for doing so. Loans in this space often come with yields around 10% or more, simply because the risk is higher. If these companies could borrow cheaply from banks or the open market, they probably wouldn’t need a BDC.

By the second quarter of 2025, Ares Capital Corporation (NASDAQ:ARCC) said its loan portfolio was earning an average yield of about 10.9%. Around 70% of those loans have floating rates, so the returns move with interest rate changes. Roughly 60% of its portfolio is made up of first-lien debt, which gives Ares first claim on assets if a borrower runs into trouble. That adds some cushion, but at the end of the day, lending to smaller private firms will always carry a fair bit of risk.

Ares Capital Corporation (NASDAQ:ARCC) is also a strong dividend payer with a quarterly payout of $0.48 per share. As of October 5, the stock has a dividend yield of 9.53%.

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Disclosure: None.