Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to […]

Lower total investment income hurts Ares Capital's (ARCC) Q1 earnings.

Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced today that it has increased commitments under its Revolving Credit Facility (the "Facility") to approximately $3.6 billion and extended the final maturity date to March 30, 2025. The Facility was led by JP Morgan, Bank of America, SunTrust Robinson Humphrey, BMO Capital Markets, MUFG Bank, Ltd. and Sumitomo Mitsui Banking Corporation and includes a total of 37 bank participants. Pricing and advance rates remain unchanged on the Facility.

The business development company said it has $2.7 billion of cash and substantial secured credit facilities to weather the crisis.

So, what’s going on in the stock markets? Are they completely haywire? Since February 19, when the bull market ended, the Dow Jones has fallen 36.6% and then gained back, in uneven steps, some 26.4% from the trough. Movements have been similar in the S&P 500 and the NASDAQ. For the last two weeks, both the S&P and Dow have been holding fairly steady – the S&P near 2,800 and the Dow near 23,500.Yet, there are more questions raised than answers. Are we in a true rally, or will the slide resume? What will happen when people return to work; will the economy pop back up again, or are we in a new recession? And if a recession, how bad will it get? The answer to that last may be worse than anticipated: the last five weeks have seen unemployment claims soar to 26 million.Taking the bearish view, Mark Jolley of CCB International Securities believes that markets will start to fall again – and drop to some 15% below their previous lows for the year. Supporting his thesis that the current rally is a temporary ‘bear market rally,’ Jolley says, “…central banks can’t stop the weakness we’re seeing in growth, they can’t stop the severe earnings decline that we still are going to get and they can’t stop corporate bond defaults.”If he’s right, then we are going to see a messy earnings season over the next few weeks. And since that will hit the markets hard, it’s time to consider defensive stocks, and how to protect your investment portfolio. The purpose of market investing is to make money: you buy low and sell high, realizing profits on the way. But that’s not the only route. Dividend stocks, which share company profits with stakeholders through regular dividend payments, provide a steady income stream for investors, no matter where the markets go.Not all stocks pay out a dividend, but those that do can be lucrative. The average yield right now, among S&P listed dividend payers, is about 2%, about triple the return available from Treasury bonds. With a bit of diligence, aided by TipRanks database, it’s easy to find plenty of stocks with reliable dividend payments and far higher yields than average.We picked 3 names that show impressive dividend yields above 8% and offer an upside potential of at least 15%. It’s a combination of factors that make them attractive as defensive portfolio moves in a bearish market.Ares Capital Corporation (ARCC)We’ll start with an asset management company, a niche that frequently pays out excellent dividends. Ares Capital is no exception to that generality – the company’s current dividend yield is impressive, over 14%. Ares supports its dividend with a wide-ranging portfolio of debt and equity investments in mid-market US companies.Ares pays out 40 cents per share quarterly, or $1.60 annually. The payout ratio is high, at 88%, and shows a company commitment to returning profits to shareholders. Ares grew its dividend slowly over the past three years, usually by maintaining the regular payment and sending out special payments when possible. Q4 saw an additional 2 cents per share paid out that way. For Q1, the dividend has been declared at 40 cents.Two months ago, Ares reported solid Q4 results, meeting the forecasts on earnings and revenue and supporting the special dividend payment. The top line grew 14% year-over-year, to $1.53 billion, while EPS came in at 45 cents per share. A possible cloud, especially in light of Q1 economic developments, was the 28% increase in overall expenses. Looking ahead, Ares sees Q1 EPS at 43 cents, more than enough to keep up the above dividend payments.Writing from Compass Point, analyst Casey Alexander likes ARCC’s position in the business development world. He writes, “In an era where BDCs were pushing hard on incremental leverage and raising target leverage ranges simply to allow themselves to cover the current dividend, ARCC was patiently originating new deals, keeping leverage modest, and raising incremental equity capital in measured doses while still maintaining solid dividend coverage. We enthusiastically supported this strategy… ARCC is unquestionably a blue chip BDC, with a best in class management team.”In line with this view, Alexander puts a $13 price target on ARCC, suggesting room for a 15% upside potential in the coming year. (To watch Alexander’s track record, click here)Alexander, while bullish on the stock, is somewhat conservative compared to the general Wall Street view here. Ares Capital has a Strong Buy analyst consensus rating, based on a unanimous 12 Buys set in recent weeks. The average price target is higher than Alexanders, at $16.38, and implies a stronger upside potential of 44% from the $11.35 share price. (See Ares Capital stock analysis on TipRanks)MGM Growth Properties (MGP)Next on our list is a real estate investment trust, a niche that frequently appears in any review of defensive dividend plays. REITs are required by tax law to return a high percentage of their profits to shareholders, and many use high-yield dividends as the vehicle of choice. MGM Growth Properties is typical of its niche in that regard. MGP focuses its own portfolio on large entertainment destinations – the company owns 13 properties in 8 states, mostly luxury casinos and hotels, with a combined total of 27,442 rooms. MGP’s operations brought in $881 million in revenue in 2019.That revenue $275 million in net income, which was returned to shareholders through the 47.5 cent quarterly dividend. At $1.90, the annualized payment gives a yield of 8.1%, 4x the S&P average and a fine return in today’s climate of low interest rates. The company has been raising the dividend in small increments over the past four years, and the current payout ratio is 81.9%, indicating that the payment is safe at current income levels.Deutsche Bank analyst Carlo Santarelli, in his review of the stock, maintained his Buy rating on MGP along with the $30 price target that implies a robust 29% upside potential. (To watch Santarelli’s track record, click here)Supporting his bullish stance, Santarelli writes, “We continue to see considerable value in MGP at current levels and believe MGM's considerable capacity to pay rent is underappreciated… We remain favorably inclined towards the gaming REIT subsector and believe MGP is well positioned from a liquidity perspective.”Overall, MGP has received 9 recent analyst reviews, breaking down as 7 Buys versus just 2 Holds and making the analyst consensus rating a Strong Buy. Santarelli’s forecast for the stock is a bit more cautious than his peers’ average; the stock has current trading price of $23.20 and an average price target of $31.22, indicating a 34% upside potential for the next 12 months. (See MGM Growth stock analysis on TipRanks)Hercules Capital (HTGC)Last on our list is a venture firm, a finance company that invests in start-ups, providing the funding, capital, and debt market access that small, early-stage companies so desperately need to but have such difficulty finding. Hercules focuses on the financial SaaS sector, life sciences, and technology, and to date has committed some $10 billion to its portfolio.Hercules ended 2019 with a solid cash position, having $235.5 million in liquid assets available, a sum that included $64.4 million in unrestricted cash. The company uses its excellent cash position to fund a reliable, and steadily growing, dividend. The current payment is 32 cents quarterly, and the company felt confidence enough to issue a special 8-cent payment in Q4 to supplement the regular dividend. The annualized payment is $1.28, and gives a sky-high yield of 14.7%.Aaron Deer, writing on Hercules for Piper Sandler, sees a sound future for the company, despite the COVID-19 epidemic: “We project solid loan production for the first quarter, but despite a big pipeline to start the year, that the outlook becomes hazier for subsequent periods. Increased caution among client companies may result in less loan demand or smaller deal sizes, though existing borrowers may look for larger lines, and competitive pressures from both equity and debt investors may wane some, allowing for better pricing on new deals… Hercules is well positioned with capital and liquidity to operate effectively through uncertain market conditions…”Deer gives the stock a $10 price target, implying an upside of 15%, and supporting his Buy rating. (To watch Deer’s track record, click here)Wall Street is generally more bullish than Deer’s review above. The Strong Buy analyst consensus on Hercules is based on 6 to 1 Buy/Hold split among the reviews. Shares are selling for $8.70, and the average price target, at $12.86, suggests that there is room for 48% share appreciation over the next year. (See Hercules stock analysis on TipRanks)To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

The rally we’re experiencing in the stock markets has become something of a sensation. While equities generally are down some 15% from their all-time high levels, reached back in February, the rebound has been substantial. The S&P 500 is almost 33% from its March 23 trough.The big factor, of course, is the coronavirus crisis and the COVID-19 pandemic. The virus has – justifiably – taken the lion’s share of the news broadcasts. But that intense focus on one item has left investors with an incomplete picture. BMO Chief Investment Strategist Brian Belski has issued a report to correct this, by broadening the picture to point out other factors that are impacting markets and investor sentiment."While the COVID-19 virus is obviously still the big concern out there in the market, several others have also been recently brought up in our client interactions, including high market cap concentration atop the S&P 500, a surge in negative dividend actions by companies, and several sector weights approaching lows [...] While we do believe these data trends should certainly continue to be monitored in the coming months, our analysis suggests that they may not be the roadblocks to US stock market performance moving forward that many investors appear to be expecting," Belski wrote.Belski says that the dividend stocks on the S&P 500 are still strong, and have not yet deteriorated as far as they did in the 2009 financial crisis. With the real possibility that an economic recovery may start in 2H20 – several states, including powerhouses like Texas and Florida, are moving to reopen now – this makes dividend stocks a valuable insurance policy for investors.With this in mind, we’ve used TipRanks database to pull up the details on three high-yield dividend stocks recommended by BMO analysts, in line with Belski’s report. Citizens Financial Group (CFG)We’ll start with Citizens Financial, one of the top retail banking companies in the US. Citizens offers an array of deposit, insurance, investment, and loan services in the commercial and retail segments.The company’s earnings, which had been solid in the $0.95 to $1.00 range for much of 2018 and 2019, slipped to just 9 cents per share in Q1 2020, and have a similar outlook for Q2. Through all of this, CFG has kept up its dividend. In fact, the company has raised the payment 5 times in the past three years. The current payment, at 39 cents per share quarterly, annualizes to $1.56 and gives a 7.2% yield. This compares highly favorably to the 2.16% average yield found among peers in the financial sector.The overall outlook is not perceived as grim – at least, not yet. The bank showed increased income from fees, clear gains in both mortgage and trust banking, and improvement in deposit balances. While low rates are bad for the loan business, CFG also showed an uptick in loan balances that bodes well. CFG has set up a small-business grant program, which is likely to both help the business sector most harmed by the COVID-19 epidemic and drum up longer-term business for the bank. In addition, the company has shored up its liquidity position through an issue of $1.5 billion in senior notes.Looking at the whole picture, BMO’s 5-star analyst Lana Chan says, “We believe that its capital and liquidity position appears sufficient to weather the COVID-19 related economic downturn.” In a more detailed outlook, she writes, “NII +low-mid single digits as strong loan growth more than offsets sizeable decrease in NIM, noninterest income down low-mid SDs, noninterest expense up slightly, LLP will depend on depth of recession and pace of recovery, significant loan growth reflecting commercial line draws, government programs, and increased demand in education.”Chan puts a $28 price target on CFG, backing her Buy rating. This target implies an upside for the stock of 31% in the coming year. (To watch Chan’s track record, click here)All in all, the analyst consensus view on Citizen’s Financial is a Strong Buy, based on 12 reviews that include 11 Buy and only a single Hold. Shares are deeply discounted and trading at $21.45, while the $28.50 average price target suggests an upside of 33%. (See Citizen Financial stock analysis at TipRanks)Ares Capital Corporation (ARCC)Next up is Ares Capital, an asset management company. Ares is well known for strong dividends, even in a business niche that usually pays out high yields. The company is currently paying out $1.60 annually, or 40 cents quarterly, making its dividend yield a robust 11.2%. Ares also has a history of adjusting its dividend payment to keep it in line with earnings, and sustainable.The company’s earnings, which took a hard hit from the coronavirus-inspired shutdowns, had already been trending down for three quarters – but remained in positive territory in Q1. EPS came in at 41 cents, missing the forecast by 4.6%. However, investors were heartened by the company’s lower reported expenses and positive activity in its portfolio. Ares also had taken successful efforts to shore up its liquidity position and overall balance sheet. These were seen as outweighing the generally expected drop in earnings.BMO’s Lana Chan was impressed by the company’s cash position. She noted, “ARCC currently has ~$460 million in cash and $2.1 billion in undrawn credit commitments. This gives it flexibility to support existing borrowers (with tighter loan documentation) and dry powder to take advantage of mis-priced opportunities (including select credit investments, large portfolios, or M&A). This extra liquidity and capital strength has the power to be a differentiating factor among BDCs…”While keeping her Buy rating on this stock, Chan lowered her price target to $16 – but this still indicates confidence in an 12% upside potential. (To watch Chan’s track record, click here)Ares Capital has a unanimous Strong Buy analyst consensus rating, based on no fewer than 14 Buy reviews. The stock’s price is trading at $14.36, and the average price target implies a modest upside of 6.4%. (See Ares Capital stock analysis at TipRanks)WP Carey & Company (WPC)You can’t talk about dividend stocks without at least mentioning one real estate investment trust. REITs are known high-performers among dividend plays, and WP Carey, with a market cap exceeding $10 billion, is one of the larger companies in the niche. The company specializes in commercial real estate, leasing properties long-term to clients in the US, and Northern and Western Europe.While most companies saw a steep earnings hit in Q1, due to this year’s pandemic, WPC managed to avoid that. The long-term nature of the company’s leases provided insulation, and Q1 FFO (funds from operations) came in at $1.25, beating the forecast by 5%, and broadly in-line with the previous five quarters’ income reports.WPC is currently paying out $1.04 per share in quarterly dividends, which annualizes to $4.16 and produces a strong yield of 7%. Like the stocks above, this dividend is sharp – and favorable – contrast to the average yields found among peer companies. WPC has a history of reliable payments, and has grown the dividend gradually over the past 6 years. The payout ratio is 83%, comparable to other REITs, and indicating that the payments are affordable at current income levels.WPC impressed BMO’s Jeremy Metz, and the analyst set a $70 price target, suggesting a 13% upside, to back his Buy rating. (To watch Metz’s track record, click here)In his comments, Metz wrote, “Our bull case on WPC in the current environment has been its revenue composition with limited relative exposure to retail, and at risk retail in particular (~2%)… the balance sheet/ liquidity remains in good shape.”Wall Street is both bullish and cautious on this stock. The Moderate Buy consensus rating is based on 2 Buy and 1 Hold set in recent months, while the $62 average price target projects a minimal upside – less than 1%. The share price has been mostly range-bound since early April, suggesting that it has found resistance at the average price target level. (See WPC stock analysis at TipRanks)To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced that its Board of Directors has declared a second quarter dividend of $0.40 per share. The second quarter dividend is payable on June 30, 2020 to stockholders of record as of June 15, 2020.

Q1 2020 Ares Capital Corp Earnings Call

Hercules Capital (HTGC) witnesses higher total investment income along with rise in expenses in the fourth quarter of 2019.

Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced today that it will report earnings for the first quarter ended March 31, 2020 on Tuesday, May 5, 2020 prior to the opening of the Nasdaq Global Select Market. Ares Capital invites all interested persons to attend its webcast/conference call at 12:00 p.m. (Eastern Time) on the same day to discuss its first quarter ended March 31, 2020 financial results.

High-yielding business development corporations are exposed to some of the small to midsize U.S. businesses expected to be hardest hit by the coronavirus crisis, leading some to pare dividends or offer payouts in shares. Some BDCs, however, are positioned to handle the distress.

Comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties, including the impact of COVID-19, related changes in base rates and significant market volatility on our business and our portfolio companies. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may and similar such expressions.

Ares Capital (ARCC) saw a big move last session, as its shares jumped more than 6% on the day, amid huge volumes.

Ares Capital Corporation ("Ares Capital") (NASDAQ:ARCC) announced today that Michael Smith, Ares Capital’s Co-President, is scheduled to present at the Deutsche Bank 10th Annual Global Financial Services Conference on Wednesday, May 27, 2020 at 2:30pm EDT.

Ares Capital (ARCC) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Business development companies (BDCs) are seeking to reassure their investors as they face a one-two punch from the coronavirus pandemic and fears of a deep recession rattle the US. BDCs are closed-ended funds that trade on public stock exchanges. Some of the largest funds, including those run by Ares Management, TPG and venture lender Hercules Capital, have released letters to stakeholders saying the credit managers are monitoring their holdings and are prepared for the uncertain times ahead.

Ares Capital (ARCC) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced today that it issued an open letter to its stakeholders regarding a business update amid the coronavirus ("COVID-19") pandemic.

Business Development Companies -- or BDCs -- are one of the few sectors where we are looking to buy at this time, explains Adrian Day, editor of The Global Analyst.

Ares Capital's (ARCC) first-quarter 2020 results are expected to reflect the favorable impacts of an anticipated rise in interest income from investments.