This High-Yield Dividend Stock (8.3%) Has Analysts Saying ‘Strong Buy’ — Should You?

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If you're looking for a smart way to grow your wealth while earning passive income, investing in high-yield dividend stocks might be a strategy worth exploring.

These stocks offer regular payouts as they often belong to companies with strong financials and reliable earnings. When a company can consistently pay dividends and maintain a healthy payout ratio, it's typically a sign of long-term stability and resilience. This can translate into dependable income and steady capital appreciation for investors.

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Among the reliable dividend stocks, Ares Capital (ARCC) stands out for its high yield and a solid history of dividend growth. With a dividend yield of about 8.3%, this specialty finance company offers an attractive income stream for those seeking to boost their portfolio’s cash flow. Moreover, the stock has also earned a “Strong Buy” consensus rating from analysts, signaling strong confidence in its future performance.

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Ares Capital Is a Dependable, High-Yield Stock

Ares Capital is a business development company specializing in providing direct loans and private financing to middle-market companies across the U.S. This segment of the market is often underserved by large traditional banks, creating demand for Ares Capital’s services and offering attractive opportunities for long-term growth and income.

Ares Capital’s diversified portfolio, strong underwriting practices, and disciplined risk management positions it well to consistently deliver solid core earnings to cover its payouts.

For instance, Ares Capital’s portfolio is highly diversified, with 566 portfolio companies and an average exposure of less than 0.2% per investment. This broad diversification helps reduce exposure to any single company or sector, enhancing portfolio resilience in the face of market volatility. The company also focuses on lending to less cyclical, service-oriented businesses with solid fundamentals, which helps it maintain stability even in uncertain economic environments. This approach continues to support both earnings and its impressive track record of dividend payouts.

In its first quarter of 2025, Ares Capital reported core earnings of $0.50 per share. Notably, credit quality remained robust, with nonaccrual loans and higher-risk credits holding at historically low levels. The company also maintained strong investment momentum, making $3.5 billion in gross commitments during the quarter.

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The company’s balance sheet remained solid and conservatively leveraged. This leaves significant capital to deploy into new opportunities. Its investment portfolio, which stood at $27.1 billion at fair value, grew modestly from the previous quarter and remains heavily weighted toward U.S.-based service businesses, which are generally less exposed to macroeconomic shocks such as rising tariffs.

All of this supports the company’s ability to generate and return consistent cash to shareholders. For the second quarter of 2025, Ares Capital announced a dividend of $0.48 per share, marking its 63rd consecutive quarter of stable or increasing payouts. Moreover, this specialty finance company has increased its dividend for 15 consecutive years.

Ares Capital remains well-positioned to sustain and grow its dividend in the future. Its core earnings consistently exceed current payout levels, and there’s optimism around potential realized gains in the portfolio, which could further boost distributable income.

Should You Buy Ares Capital Stock?

Ares Capital is a compelling investment for investors seeking both income and growth. With a robust 8.3% dividend yield, a diversified and resilient portfolio, and a 15-year track record of dividend growth, Ares Capital emerges as a dependable high-yield stock.

Further, analysts’ “Strong Buy” consensus reflects confidence in Ares Capital’s earnings strength and long-term outlook. Its solid risk management practices, low leverage profile, and focus on less-cyclical service sectors offer meaningful insulation against market volatility and economic uncertainty. Additionally, the company’s continued ability to generate core earnings above its dividend obligations suggests potential for future dividend growth.

While no investment is without risk, Ares Capital’s strong fundamentals and shareholder-friendly policies make it an attractive high-yield dividend stock.

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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com