ARCC

Ares Capital is the largest business development company, lending to middle-market firms, and FY2025 was a solid if slightly softer year. Net income was $1.30B (down 14.7% YoY) and diluted EPS $1.86 (down 23.8%, partly reflecting a 6.9% increase in shares outstanding from at-the-market issuance to fund portfolio growth). At $18.03 the stock trades at a 9.7 P/E. Total assets grew 10.6% to $31.2B and equity rose 7.2% to $14.3B, while ROE held at a respectable 9.1%. For a BDC, the negative operating cash flow of -$1.72B is expected — it reflects cash deployed into new portfolio investments, not operating distress.

The income case is the heart of the thesis: Ares paid $1.26B of dividends, up 11.0% YoY, and the under-10 P/E implies a substantial, well-supported yield. The portfolio is diversified and largely senior, with the filing noting that as of December 31, 2025, only 1% of investments were on non-accrual status and 9% were non-income producing — credit quality that looks well-contained for a direct lender.