One Of My Favorite Monthly Dividend Payers Yields 10% Right Now…
A couple of weeks ago, I talked about the idea of monthly dividend payers, rather than quarterly.
As I said back then, “…if one dividend check every quarter is great, then imagine if you receive one every 30 days…”
Here are a few reasons I cited that make monthly dividends appealing:
– more convenient (especially if you’re paying bills or other expenses)
– minimizes risk (particularly if you’re reinvesting)
– easier to sell when the time comes (because you feel less tempted to wait for the next big payment)
But I’m not writing this to recap the reasons why monthly payers are great. Instead, I want to share one of my favorites with you today.
As I said in my original piece, monthly dividend payers do exist… you just have to know where to look.
One Of My Favorite Monthly Dividend Payers Is A BDC
With a market capitalization of just under $10 billion and total assets of $21.8 billion, Ares Capital Corporation (Nasdaq: ARCC) ranks as the nation’s largest business development company (BDC). It’s also one of only three in this industry to garner an investment-grade credit rating.
I wrote about BDCs in detail here.
Essentially, BDCs provide financing to small and medium-sized businesses that don’t always have access to traditional bank lending. The proceeds are normally used for growth projects and other operating needs, but cash is sometimes needed for leveraged buyouts or other big transactions.
BDCs are publicly traded and enjoy some unique perks. One is an exemption from federal income taxes, provided the company distributes at least 90% of its investment profits to shareholders (similar to REITs).
As a result, BDCs also carry some of the highest “legit” yields you’ll find anywhere on the market.
Like other BDCs, Ares provides financing to private companies needing cash through senior secured loans and other debt packages. Aside from loan originations, Ares also takes equity ownership positions in some businesses, providing capital appreciation and steady income.
ARCC: The Biggest BDC On The Block
ARCC is externally managed by Ares Management, an organization with $100+ billion in global assets under management (AUM) and a team of 400 investment professionals. Since 2004, ARCC has invested $85 billion in nearly 1,000 transactions.
ARCC currently has 466 portfolio holdings spread across two dozen different industries, from oil and gas to healthcare. But the experienced management staff doesn’t lend money to anyone who comes asking – far from it. The diligent research team rejects 95% of the proposals reviewed and only closes on 5% of the available deals presented.
Being selective keeps the company out of trouble. And even then, in the rare event a company defaults on its loan obligations, ARCC ultimately recovered 100% of the capital extended to those borrowers. But it isn’t sacrificing anything in terms of payouts – not with an average yield on its loans of 11%.
ARCC dishes out a consistent quarterly dividend of $0.48 per share, or $1.92 annually, which puts the yield at about 10%.
And while many others are scraping together every last dime to meet their dividends, Ares has room to spare – with an average coverage ratio north of 115% for most of the past decade.
Action To Take
With fewer charge-offs and higher realized gains as a percentage of total assets, Ares has outperformed the broader BDC universe, as well as most commercial banks, for more than a decade. I see no reason that trend won’t continue in 2023.
ARCC is just one of my favorite monthly dividend payers. But there are dozens of other monthly payers out there…
Most people don’t know they exist. But I make it my business to research the best income payers the market has to offer. And Realty Income is just one of the securities that pay you thousands of dollars every single month.
In my latest report, I reveal 12 of the top monthly dividend payers that you should consider owning. Go here to learn more now…