Is Ares Capital Stock a Buy Now?
Ares Capital (NASDAQ: ARCC) is somewhat outside the mainstream when it comes to investing. The lofty 9.3% dividend yield on offer is attractive. However, you need to understand what you are buying, or you could end up disappointed with the company's performance. Here's why ultra-high-yield Ares Capital could be a buy now and, perhaps more importantly, for whom.
Ares Capital is a business development company (BDC). This is a highly specialized corporate structure designed to distribute income to shareholders in a tax-efficient manner. The company avoids corporate-level taxation by distributing at least 90% of taxable income as dividends. The trade-off is that shareholders must treat those dividends as income when reporting their taxes. The 9.3% dividend yield is partly a reflection of Ares Capital being a BDC.
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Source Fool.com
