Traders Buy High Volume of Put Options on Ares Capital (NASDAQ:ARCC)

Key Points

• Investors bought 11,684 put options on Ares Capital (ARCC) in one day — about a 99% increase versus typical put volume — signaling unusually heavy bearish positioning or hedging activity.
• Ares declared a quarterly dividend of $0.48 (a 10.3% yield) payable Mar 31 with an ex-dividend date of Mar 13, but its dividend payout ratio is ~103%, which raises sustainability concerns.
• Despite the options activity and some analyst downgrades, insiders (CFO Scott Lem and CEO Michael Schnabel) recently purchased shares and analysts collectively rate the stock a Moderate Buy with an average price target of $22, indicating mixed but mildly positive sentiment.

Ares Capital Corporation (NASDAQ:ARCC - Get Free Report) was the recipient of some unusual options trading activity on Tuesday. Investors acquired 11,684 put options on the company. This is an increase of 99% compared to the typical volume of 5,885 put options.

Ares Capital Trading Down 0.5%

ARCC traded down $0.09 during trading on Tuesday, hitting $18.61. 3,440,526 shares of the company's stock were exchanged, compared to its average volume of 7,263,326. The stock has a 50 day moving average price of $19.86 and a 200 day moving average price of $20.36. Ares Capital has a 1 year low of $18.17 and a 1 year high of $23.42. The company has a current ratio of 1.70, a quick ratio of 1.70 and a debt-to-equity ratio of 1.12. The firm has a market cap of $13.36 billion, a P/E ratio of 10.00 and a beta of 0.59.

Ares Capital (NASDAQ:ARCC - Get Free Report) last announced its earnings results on Wednesday, February 4th. The investment management company reported $0.50 EPS for the quarter, meeting the consensus estimate of $0.50. Ares Capital had a return on equity of 9.89% and a net margin of 42.56%.The business had revenue of $793.00 million for the quarter, compared to the consensus estimate of $795.20 million. During the same period last year, the business posted $0.55 EPS. The company's revenue was up 4.5% on a year-over-year basis. As a group, analysts expect that Ares Capital will post 2.19 EPS for the current fiscal year.

Ares Capital Dividend Announcement

The business also recently disclosed a quarterly dividend, which will be paid on Tuesday, March 31st. Shareholders of record on Friday, March 13th will be issued a dividend of $0.48 per share. This represents a $1.92 annualized dividend and a yield of 10.3%. The ex-dividend date of this dividend is Friday, March 13th. Ares Capital's dividend payout ratio (DPR) is currently 103.23%.

Analyst Upgrades and Downgrades

ARCC has been the topic of a number of research reports. Wells Fargo & Company dropped their target price on shares of Ares Capital from $21.00 to $20.00 and set an "overweight" rating for the company in a report on Thursday, February 5th. Wall Street Zen downgraded Ares Capital from a "hold" rating to a "sell" rating in a research report on Saturday, February 7th. Royal Bank Of Canada lowered their target price on Ares Capital from $23.00 to $22.00 and set an "outperform" rating on the stock in a report on Monday, February 9th. Weiss Ratings restated a "hold (c+)" rating on shares of Ares Capital in a research report on Monday, December 29th. Finally, B. Riley Financial reissued a "buy" rating on shares of Ares Capital in a research note on Monday, February 9th. Seven investment analysts have rated the stock with a Buy rating and two have issued a Hold rating to the company's stock. According to MarketBeat.com, the company currently has an average rating of "Moderate Buy" and an average price target of $22.00.

Insider Buying and Selling at Ares Capital

In other Ares Capital news, CFO Scott C. Lem bought 5,186 shares of the business's stock in a transaction dated Friday, February 6th. The shares were acquired at an average cost of $19.29 per share, with a total value of $100,037.94. Following the acquisition, the chief financial officer directly owned 39,463 shares of the company's stock, valued at $761,241.27. The trade was a 15.13% increase in their position. The purchase was disclosed in a legal filing with the SEC, which is accessible through this link. Also, CEO Michael Kort Schnabel acquired 12,500 shares of the firm's stock in a transaction on Thursday, February 5th. The shares were bought at an average cost of $19.13 per share, with a total value of $239,125.00. Following the completion of the transaction, the chief executive officer directly owned 40,500 shares in the company, valued at $774,765. This trade represents a 44.64% increase in their position. The disclosure for this purchase is available in the SEC filing. Corporate insiders own 0.48% of the company's stock.

Institutional Investors Weigh In On Ares Capital

Institutional investors have recently made changes to their positions in the company. Corient Private Wealth LLC boosted its holdings in shares of Ares Capital by 0.3% during the fourth quarter. Corient Private Wealth LLC now owns 1,193,526 shares of the investment management company's stock valued at $24,145,000 after acquiring an additional 4,064 shares during the period. Hsbc Holdings PLC acquired a new position in Ares Capital during the 4th quarter valued at about $1,305,000. SHP Wealth Management acquired a new stake in shares of Ares Capital in the 4th quarter worth approximately $42,000. Sankala Group LLC bought a new stake in Ares Capital during the fourth quarter worth approximately $28,000. Finally, Clearwave Capital LLC bought a new position in Ares Capital during the fourth quarter valued at about $306,000. 27.38% of the stock is currently owned by institutional investors.

Ares Capital Company Profile

Ares Capital Corporation NASDAQ: ARCC is a publicly traded business development company (BDC) that specializes in providing debt and equity financing solutions to U.S. middle-market companies. As a BDC, Ares Capital offers investors access to a diversified portfolio of tailored credit investments, including senior secured loans, unitranche financing, mezzanine debt and equity co-investments. The firm's flexible capital structures are designed to support companies seeking growth capital, refinancing or strategic acquisitions.

Through its credit platform, Ares Capital focuses on originations, underwriting and portfolio management across a range of industries, with a particular emphasis on sectors such as healthcare, technology, industrials and business services.

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