BDC stock: Ares Capital (ARCC)
Dividend frequency: Quarterly
Current ARCC dividend: $0.38 per share
ARCC’s Dividend History
Ares Capital Corporation went public in a blank check IPO. At the time of the offering, Ares Capital did not yet have an investment portfolio. Therefore, the company quickly increased its dividend from $0.30 per share to a pre-crisis high of $0.42 per share.
Ares Capital’s dividend was cut during the financial crisis, but mostly recovered thanks to a spectacular acquisition of Allied Capital and accretive stock offerings that helped it grow NAV per share, and its earnings power.
Material Changes in ARCC’s Dividend Policy
There are a few landmark periods on Ares Capital’s distribution timeline that you should know about.
First special dividend in 2006
Thanks to strong underwriting performance, Ares Capital paid a special dividend to its shareholders in 2006 in the amount of $0.10 per share. A press release from the era included a statement from Company President, Michael Arougheti.
“We have generated realized capital gains of $26 million year to date and over $36 million in realized gains since inception. Due to this very strong performance, we expect our taxable income to exceed our dividend this year and, therefore, have declared an additional dividend of $0.10 per share to be paid along with our regular fourth quarter dividend of $0.40 per share.” Source: Press release.
First ARCC dividend cut in 2009
Ares Capital cut its dividend during the meltdown from the 2008 Global Financial Crisis. In June 2009, the company reduced its dividend to just $0.35 per share.
Post-crisis dividend increase in 2011
Following its acquisition of Allied Capital, and with its portfolio investments recovering, Ares Capital increased its dividend in 2011, the first time since the financial crisis.
President Michael Arougheti commented, “We had a solid third quarter highlighted by growth in our core earnings per share, healthy net realized gains and stable credit quality. We were very active during the quarter using our competitive advantages to make a number of attractive senior secured debt investments in high quality companies. In addition, we raised our quarterly dividend from $0.35 per share to $0.36 per share.” Source: press release.
ARCC’s dividend stabilizes
After a few post-crisis increases, Ares Capital’s dividend reaches $0.38 per share in 2013, a level it has maintained to date. On certain occasions, the dividend has been supplemented with special dividends in the amount of $0.05 per share. Ares Capital has one of the best track records for paying consistent and reliable dividends in the BDC industry, particularly among BDCs that got their start during the frothy buyout bubble of the mid-2000s.