Unveiling Ares Dynamic Credit Allocation Fund Inc's Dividend Performance and Sustainability
Deep Dive into ARDC's Dividend History, Yield, and Growth Rates
Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) has recently announced a dividend of $0.12 per share, to be paid on 2023-09-29, with the ex-dividend date set for 2023-09-20. As investors eagerly anticipate this upcoming payment, it's crucial to examine the company's dividend history, yield, and growth rates. Let's use GuruFocus data to scrutinize Ares Dynamic Credit Allocation Fund Inc's dividend performance and assess its sustainability.
Understanding Ares Dynamic Credit Allocation Fund Inc's Business
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Ares Dynamic Credit Allocation Fund Inc is a closed-end, diversified management investment company. The fund's objective is to provide an attractive level of total return, primarily through current income and, secondarily, through capital appreciation. The Fund invests in a broad, dynamically managed portfolio of senior secured loans, 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).
Exploring Ares Dynamic Credit Allocation Fund Inc's Dividend History
Ares Dynamic Credit Allocation Fund Inc has maintained a consistent dividend payment record since 2017, currently distributing dividends on a monthly basis. Below is a chart showing the annual Dividends Per Share to track historical trends.
Deciphering Ares Dynamic Credit Allocation Fund Inc's Dividend Yield and Growth
Currently, Ares Dynamic Credit Allocation Fund Inc has a 12-month trailing dividend yield of 10.08% and a 12-month forward dividend yield of 10.98%, indicating an expected rise in 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%. However, when extended to a five-year horizon, this rate increased to 40.10% per year. Based on the company'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 54.41%.
Assessing Dividend Sustainability: Payout Ratio and Profitability
The sustainability of a dividend is often evaluated through the company's payout ratio. The dividend payout ratio reveals the portion of earnings the company distributes as dividends. A lower ratio implies that the company retains a significant part of its earnings, ensuring 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 3 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
For dividends to be sustainable, a company must have robust growth metrics. Ares Dynamic Credit Allocation Fund Inc's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Conclusion
While Ares Dynamic Credit Allocation Fund Inc's dividend payments and growth rate are impressive, the high payout ratio and low profitability and growth ranks raise questions about the sustainability of its dividends. Investors should carefully consider these factors before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
