Yahoo Finance Ares Dynamic Credit Allocation Fund Inc's Dividend Analysis
Assessing the Sustainability of ARDC's Upcoming Dividend
Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) recently announced a dividend of $0.12 per share, payable on 2024-01-31, with the ex-dividend date set for 2024-01-19. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Ares Dynamic Credit Allocation Fund Inc's dividend performance and assess its sustainability.
What Does Ares Dynamic Credit Allocation Fund Inc Do?
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Ares Dynamic Credit Allocation Fund Inc is a closed-end, diversified management investment company. The fund's investment objective is to provide an attractive level of total return, through current income and, secondarily, through capital appreciation. The Fund invests in a broad, dynamically managed portfolio of senior secured loans (Senior Loans) made to companies whose debt is rated below investment grade; corporate bonds (Corporate Bonds) that are high yield issues rated below investment grade; other fixed-income instruments of a similar nature that may be represented by derivatives; and securities of collateralized loan obligations (CLOs).
A Glimpse at Ares Dynamic Credit Allocation Fund Inc's Dividend History
Ares Dynamic Credit Allocation Fund Inc has maintained a consistent dividend payment record since 2017. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Ares Dynamic Credit Allocation Fund Inc's Dividend Yield and Growth
As of today, Ares Dynamic Credit Allocation Fund Inc currently has a 12-month trailing dividend yield of 9.96% and a 12-month forward dividend yield of 10.33%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Ares Dynamic Credit Allocation Fund Inc's annual dividend growth rate was -2.50%. Extended to a five-year horizon, this rate increased to 40.10% per year. Based on Ares Dynamic Credit Allocation Fund Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Ares Dynamic Credit Allocation Fund Inc stock as of today is approximately 53.76%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Ares Dynamic Credit Allocation Fund Inc's dividend payout ratio is 0.97, which may suggest that the company's dividend may not be sustainable.
Ares Dynamic Credit Allocation Fund Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Ares Dynamic Credit Allocation Fund Inc's profitability 2 out of 10 as of 2023-06-30, suggesting the dividend may not be sustainable. The company has reported net profit in 5 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Ares Dynamic Credit Allocation Fund Inc's growth rank of 2 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Next Steps
In conclusion, while Ares Dynamic Credit Allocation Fund Inc's attractive dividend yield and history of consistent payments may be appealing, the company's low profitability rank and negative three-year dividend growth rate raise concerns about the sustainability of its dividends. The five-year dividend growth rate and yield on cost indicate some potential for dividend investors, but the overall picture is mixed given the growth and profitability challenges. Investors should consider these factors carefully when evaluating Ares Dynamic Credit Allocation Fund Inc as a potential addition to their dividend portfolios. For those seeking additional investment opportunities, GuruFocus Premium users can explore high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
