ARES CAPITAL CORP (ARCC)

NII per share of $0.50 covers the declared dividend of $0.48 per share at 104% (payout_coverage metric confirms 1.04), placing coverage solidly in the 95–105% range. The company demonstrates a 17-year track record of stable or increasing quarterly dividends with no recent cuts, and non-accruals are historically low at 1.4% of fair value. While coverage is not above the 110% threshold for a score of 5, the combination of adequate coverage, strong historical dividend stability, and healthy portfolio credit quality supports a score between 3 and 5, warranting a 4.

ARCC demonstrates strong balance sheet positioning with leverage at 1.15x debt-to-equity (1.12x net of cash), comfortably within acceptable BDC ranges and below typical stress thresholds. The company has diversified funding sources including $800 million of unsecured notes issued in May 2026, a newly launched commercial paper program (first in BDC sector), and $6.7 billion in available liquidity under credit facilities, indicating robust access to capital markets. Debt maturity profile is well-laddered with no meaningful near-term maturities post-July 2026 repayment, and the company raised $1.2 billion in additional financing during Q2 while improving facility economics. Non-accruals at 1.4% of fair value are historically low, supporting asset quality and reducing leverage stress.

Non-accruals at 1.4% of fair value are well below the 5% threshold and near the top-tier anchor of <1%, placing this metric solidly in the 4–5 range. The earnings release confirms 'historically low levels of non-accruing loans and problem assets' with non-accruals at 2.4% of amortized cost (1.4% at fair value) as of June 30, 2026. Net realized losses were modest at -$0.01 per share in Q2-26, and no PIK income is mentioned in the portfolio composition or earnings data. The portfolio shows strong credit quality with a weighted average grade of 3.1 and 71% floating-rate securities, supporting stable income generation. The score reflects excellent non-accrual performance and absence of material PIK or realized loss concerns, though the presence of any realized losses prevents a perfect 5 score.

ARCC demonstrates strong portfolio quality with 59% first-lien senior secured loans as of June 30, 2026, approaching the 80%+ threshold. The portfolio shows granular diversification across 619 portfolio companies representing 273 separate private equity sponsors, with no single concentration risk evident. Non-accruing loans represent only 1.4% of fair value, indicating historically low problem assets and defensive underwriting. The weighted average portfolio grade of 3.1 and 71% floating-rate securities provide additional downside protection. While the first-lien percentage falls slightly short of the 5-anchor benchmark of 80%+, the combination of strong granularity, low non-accruals, and diversified sponsor base supports a high-quality portfolio positioning.

ARCC operates under Ares Management's external management structure with a standard 1% base fee on net assets and 17.5% incentive fee on net realized gains, typical for BDCs. NAV per share declined modestly from $19.94 at December 31, 2025 to $19.35 at June 30, 2026, representing a 2.9% decline over six months. The company maintains a strong operational track record with 17 years of stable or increasing quarterly dividends and solid Core EPS of $0.47 in Q2 2026, but the recent NAV compression and standard fee structure without enhanced shareholder protections (such as net-asset base fees or extended lookback periods) align with a mid-range assessment.

Valuation scored against the same-category peer cross-section (peer_fallback) from this nightly pass, because this name has fewer than 8 own-history points so far.