Ares Capital's 10% dividend yield could be vulnerable to cuts during a recession or credit downturn. As a business development company, Ares Capital must distribute at least 90% of taxable earnings to shareholders, but it lends to smaller companies at high rates, with an average portfolio yield of 10.3% in the first quarter of 2026. Many of its loans are floating-rate, so rising interest rates can strain borrowers and increase defaults. The company cut its dividend in each of the last two recessions, and its payout has been highly variable, making it unreliable for essential living expenses.
Ares Capital CorporationArticle warns of dividend cut risk during credit downturn, citing past cuts in recessions and variable payout.