After yesterday’s edition looking at three high-momentum stocks that could surge this week, it’s always nice to look at something completely different the next day.
That’s why today, we’re going to look at a dividend play with a yield that’s currently touching 10%.
More importantly, this high yield was NOT caused by a falling stock price (the classic high-yield trap), as this company’s stock has been extremely stable over the past few years.
Oh, and did I mention that Warren Buffett also owns this stock?
If you’re even remotely interested in generating income from your stock holdings, you need to seriously consider this stock.
Ares Capital Corporation (ARCC)
Ares Capital is what is known as a Business Development Company (BDC). BDCs are publicly-traded companies that invest their shareholders’ capital in private U.S. small and medium-sized enterprises, whether in the form of secured loans or equity positions.
Because of this, analyzing BDCs is a credit play, dependent on the quality of companies in their portfolio. In the case of Ares Capital, there are a few “shortcuts” that point toward it being the top BDC in the market.
For one, it’s the largest, with nearly $22 billion in assets. Second, there’s the fact that Warren Buffett owns stock in Ares Capital – and you know he’s not one to skip on due diligence.
Third is its long-term track record – nearly two decades in operation, successfully navigating through multiple market crises and downturns. The company has achieved by sticking to solid, fundamental investment principles, such as heavy diversification and conservative valuations, and not aggressively raising the dividend.
All this has been reflected in its super-stable long-term stock price coupled with steady dividend returns.
In short, if you’re looking for a reliable income-generator that is unlikely to go awry, you might want to follow Buffett’s footsteps and invest in Ares Capital.
To your wealth,
Felix @ Ace of Investing