Is Ares Capital Worth Your Investment at $22? Understanding Its 9%+ Annual Yield Potential

Ares Capital Corporation (NASDAQ: ARCC) has recently dipped below the $22 per share mark, creating what many investors see as an attractive entry point. What makes this particularly compelling for income-focused portfolios is the business development company’s dividend yield, which has climbed above 9% — substantially outpacing the S&P 500’s modest 1.2% yield. To put this in perspective, a 9% annual yield translates to meaningful income generation that could represent what $22 per hour computes to on a much larger capital base — highlighting how different investment vehicles can create varied wealth-building timelines.

Portfolio Expansion Despite Headwinds from Lower Interest Rates

Ares Capital operates in the private credit space, providing direct loans and equity investments to middle-market companies with annual revenues between $100 million and $1 billion. This capital deployment generates interest income and dividends that are distributed to shareholders — a requirement that BDCs (Business Development Companies) must fulfill by distributing at least 90% of taxable income annually to maintain regulatory compliance.

The company’s financial trajectory demonstrates resilience through changing market conditions. Over the past year, Ares Capital expanded its investment portfolio from $25.9 billion (Q3 2024) to $28.7 billion (Q3 2025), translating to substantial capital deployment. Simultaneously, the company’s net asset value (NAV) per share grew from $19.77 to $20.01, even as the weighted average yield on investments compressed from 11.7% to 10.6% due to declining interest rates.

While lower rates initially appear challenging for a lending-focused business, Ares Capital has strategically capitalized on this environment. Recently, the company issued $750 million in unsecured notes at 5.25% due in 2031 — a meaningful improvement from the 5.8% rate on $1 billion of notes issued a year earlier. This lower cost of debt funding helps offset compression in investment yields, enabling the company to maintain profitability while expanding the portfolio.

The $5.4 Trillion Private Credit Opportunity

What separates Ares Capital from traditional banking is the massive structural shift happening in corporate finance. Over the past four decades, the banking industry has consolidated dramatically, with bank numbers declining by 70%. Simultaneously, more companies are remaining private longer or going private through deals with private equity funds, limiting their access to public capital markets.

This creates an enormous addressable market for private credit providers like Ares Capital. The company estimates a $3 trillion opportunity in the traditional middle market, plus an additional $2.4 trillion market among larger private companies — a combined $5.4 trillion runway for growth. During Q3 2025 alone, Ares Capital raised over $1 billion in new debt capital, enabling $3.9 billion in new investment commitments across 35 new portfolio companies and 45 existing ones.

Measuring Investment Value Below $22

When examining whether $22 represents a fair entry price, the comparison to NAV proves instructive. Ares Capital’s current NAV stands above its recent share price, creating a potential valuation cushion. While the NAV premium has narrowed over the past year (making current pricing more attractive relative to historical valuations), the company continues generating meaningful per-share value.

The dividend track record strengthens the investment case further. Ares Capital has maintained a stable or rising regular quarterly dividend for 16 consecutive years — a testament to disciplined capital management and consistent cash generation across economic cycles. At current prices, this translates to the aforementioned 9%+ annual distribution, providing substantial cash returns that investors reinvest or use for income.

Why This Positioning Matters for Income Investors

Ares Capital’s combination of portfolio expansion, strategic debt refinancing at improving rates, and exposure to a rapidly growing private credit market suggests the business can sustain both dividend payments and NAV growth. The company’s strong institutional relationships and proven investment track record position it to continue capitalizing on the structural shift toward private financing.

For income-oriented investors seeking yields that meaningfully exceed the S&P 500, prices below $22 per share offer compelling mathematics. The 9%+ annual distribution rate, coupled with exposure to secular growth trends in private credit, creates a risk-reward profile worth evaluating for portfolio inclusion. Whether market conditions hold or rates move differently will ultimately determine outcomes, but the current price level appears to offer investors a defensible entry point into a business benefiting from lasting trends in corporate finance.