Ares Capital Yield Tops 10.8% While Shares Hit 52-Week Low, Truist Upgrades
Truist upgraded Ares Capital to Buy with a $18.50 price target after shares fell 24% year-to-date to a 52-week low near $15.80. The lender’s dividend yield has risen to 10.8%, driven by stable NAV coverage and a rebound in middle-market lending.
1. Truist Upgrade and Price Target
Truist raised its rating on Ares Capital to Buy from Hold and set a $18.50 price target, citing resilient net asset value support and anticipated growth in middle-market lending. The upgrade reflects confidence in the firm’s ability to maintain its high-distribution profile through varied economic cycles.
2. Yield Surges to 10.8%
Shares of Ares Capital have declined approximately 24% year-to-date, pushing the dividend yield to 10.8%, its highest level since 2020. This yield stands well above the BDC sector average of about 9%, highlighting steep valuation discounts.
3. Valuation and Sector Outlook
Trading near a 52-week low of $15.80, Ares Capital is one of the most discounted large-cap BDCs and could see upside if credit conditions improve. Analysts point to improving middle-market lending fundamentals and strong NAV coverage as catalysts for a rerating.