ARCC
Ares Capital Corporation
Financial Services · Asset Management · United States · Stock
Score Breakdown
Scored for Safe Long-Term Investing profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- The near-minimum growth score reflects the 14.7% drop in net income and 23.8% decline in diluted EPS from FY2024 to FY2025, which heavily weighed down the composite score.
- The near-zero momentum score captures the steep sequential decline in quarterly earnings, culminating in just $92,000,000 in 2026Q1, signaling accelerating deterioration.
- Moderate scores in financial health and profitability — supported by a $31,235,000,000 asset base, 1.12 debt-to-equity, and 9.1% return on equity — partially offset the weak growth and momentum readings, but not enough to lift the total meaningfully.
Why Not Higher
- The combination of sharply falling annual earnings, a near-zero momentum score driven by the 2026Q1 collapse in net income, and a 97.3% payout ratio that leaves no retained earnings buffer prevents a higher composite score.
- ARCC's absence from any of the 24 tracked macro themes means it received no theme-related score contribution, further limiting its total.
Data Confidence
7 / 10
High — most data fields present
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Net income declined from FY2024's $1,522,000,000 to FY2025's $1,299,000,000, a drop of 14.7%, while diluted EPS fell from $2.44 in FY2024 to $1.86 in FY2025, a decline of 23.8%.
The model penalized ARCC heavily for these year-over-year contractions in both earnings and per-share profitability, resulting in a near-minimum growth score.
ARCC generated a return on equity of 9.1% in FY2025.
A return on equity of 9.1% in FY2025 reflects moderate profitability; the model awarded a mid-range score, recognizing positive but not exceptional returns relative to equity.
In FY2025, ARCC carried a debt-to-equity ratio of 1.12 and reported total assets of $31,235,000,000.
A debt-to-equity ratio of 1.12 in FY2025 indicates moderate leverage that is typical for a business development company, and the substantial asset base of $31,235,000,000 supports a relatively strong financial health score from the model.
Quarterly net income over the last four reported quarters showed significant deterioration: $361,000,000 in 2025Q2, $404,000,000 in 2025Q3, then a sharp drop to $293,000,000 in 2025Q4, and a further decline to $92,000,000 in 2026Q1.
The steep sequential deceleration in net income, culminating in a $92,000,000 result in 2026Q1, signals a strongly negative earnings momentum trend that the model reflected with a near-minimum score.
ARCC's dividend payout ratio in FY2025 was 97.3%, and dividends per share have been flat at $1.92 from FY2023 through FY2025, following $1.87 in FY2022.
While the consistent dividend history demonstrates commitment to distributions, the near-total payout of earnings (97.3% in FY2025) leaves minimal retained earnings for growth and signals limited dividend coverage cushion, which the model appears to have weighed against the stability of the per-share amount.
ARCC is not currently assigned to any of the 24 tracked macro themes.
The absence of a macro theme assignment means the security did not receive theme-related score contribution under the model's current methodology; this reflects a classification status rather than any judgment about the company's business.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
Ares Capital Corporation (ARCC) scores 33.0/100 with a Medium risk rating and a Monitor Only label, reflecting meaningful deterioration across key financial metrics. Net income fell 14.7% year-over-year to $1,299,000,000 in FY2025, while diluted EPS dropped 23.8% to $1.86, and quarterly earnings have continued to decelerate sharply into 2026Q1 at just $92,000,000. On the positive side, ARCC maintains a substantial asset base of $31,235,000,000 and a moderate debt-to-equity ratio of 1.12, consistent with typical business development company leverage, though its near-total dividend payout ratio of 97.3% leaves little room for retained earnings or coverage cushion.
Plain English
ARCC is a large lending company that is paying out almost all of its profits as dividends, but those profits have been shrinking fast — earnings dropped sharply over the past year and have continued falling into early 2026, which is why the model flags it as one to watch rather than act on.
Bull Case vs. Bear Case
Bull Case
- ARCC's total asset base of $31,235,000,000 in FY2025 demonstrates significant scale, providing a broad foundation for income generation typical of a business development company.
- The debt-to-equity ratio of 1.12 in FY2025 reflects moderate leverage that is considered normal for the BDC sector, suggesting the balance sheet is not excessively stretched.
- ARCC has maintained a consistent dividend per share of $1.92 from FY2023 through FY2025, demonstrating a stable commitment to shareholder distributions over multiple years.
Bear Case
- Net income declined 14.7% from FY2024 to FY2025, and diluted EPS fell an even steeper 23.8%, signaling meaningful erosion in earnings power on both an absolute and per-share basis.
- Quarterly net income has deteriorated sharply, falling from $404,000,000 in 2025Q3 to just $92,000,000 in 2026Q1, representing a deeply negative earnings momentum trend.
- With a dividend payout ratio of 97.3% in FY2025, ARCC retains almost nothing from earnings, leaving minimal buffer if income continues to decline and raising questions about dividend sustainability.
What Could Change the Picture
Bullish Triggers
- A sustained reversal in quarterly net income — returning toward the $361,000,000–$404,000,000 range seen in mid-2025 — would signal that the earnings deterioration has stabilized.
- A meaningful reduction in the payout ratio, indicating stronger earnings coverage of the dividend, would improve confidence in both profitability and distribution sustainability.
Bearish Triggers
- If quarterly net income continues to decline below the $92,000,000 level seen in 2026Q1, the already thin dividend coverage could come under serious pressure.
- Any increase in the debt-to-equity ratio beyond current levels of 1.12 amid falling earnings would heighten financial risk concerns for this leveraged BDC structure.
Red Flags
- ONE_TIME_REVIEW: 2022 OCF/NI ratio = -2.27 (OCF=-1,359,000,000, NI=600,000,000) — possible large one-time item
- ONE_TIME_REVIEW: 2024 OCF/NI ratio = -1.40 (OCF=-2,128,000,000, NI=1,522,000,000) — possible large one-time item
- ONE_TIME_REVIEW: 2025 OCF/NI ratio = -1.32 (OCF=-1,717,000,000, NI=1,299,000,000) — possible large one-time item
Risk Profile
Medium RiskARCC carries moderate financial risk given a debt-to-equity ratio of 1.12 in FY2025, which is typical for a BDC but leaves limited deleveraging room if earnings continue to fall. The sharp deceleration in quarterly net income — from $404,000,000 in 2025Q3 to $92,000,000 in 2026Q1 — amplifies near-term risk by threatening the company's ability to sustain its current dividend and service obligations.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.