If you're looking for a smart way to grow your wealth while earning passive income, investing in high-yield dividend stocks might be a strategy worth exploring.
These stocks offer regular payouts as they often belong to companies with strong financials and reliable earnings. When a company can consistently pay dividends and maintain a healthy payout ratio, it's typically a sign of long-term stability and resilience. This can translate into dependable income and steady capital appreciation for investors.
Among the reliable dividend stocks, Ares Capital (ARCC) stands out for its high yield and a solid history of dividend growth. With a dividend yield of about 8.3%, this specialty finance company offers an attractive income stream for those seeking to boost their portfolio’s cash flow. Moreover, the stock has also earned a “Strong Buy” consensus rating from analysts, signaling strong confidence in its future performance.
Ares Capital is a business development company specializing in providing direct loans and private financing to middle-market companies across the U.S. This segment of the market is often underserved by large traditional banks, creating demand for Ares Capital’s services and offering attractive opportunities for long-term growth and income.
Ares Capital’s diversified portfolio, strong underwriting practices, and disciplined risk management positions it well to consistently deliver solid core earnings to cover its payouts.
For instance, Ares Capital’s portfolio is highly diversified, with 566 portfolio companies and an average exposure of less than 0.2% per investment. This broad diversification helps reduce exposure to any single company or sector, enhancing portfolio resilience in the face of market volatility. The company also focuses on lending to less cyclical, service-oriented businesses with solid fundamentals, which helps it maintain stability even in uncertain economic environments. This approach continues to support both earnings and its impressive track record of dividend payouts.
In its first quarter of 2025, Ares Capital reported core earnings of $0.50 per share. Notably, credit quality remained robust, with nonaccrual loans and higher-risk credits holding at historically low levels. The company also maintained strong investment momentum, making $3.5 billion in gross commitments during the quarter.
