Ares Dynamic Credit Allocation Fund Inc's Dividend Analysis
In This Article:
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.