Head to Head Contrast: Ares Capital (NASDAQ:ARCC) vs. Kayne Anderson BDC (NYSE:KBDC)
by Tristan Rich · The Markets DailyKayne Anderson BDC (NYSE:KBDC – Get Free Report) and Ares Capital (NASDAQ:ARCC – Get Free Report) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, analyst recommendations, institutional ownership, valuation, dividends, earnings and profitability.
Dividends
Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 11.7%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 10.7%. Kayne Anderson BDC pays out 120.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Capital pays out 103.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Profitability
This table compares Kayne Anderson BDC and Ares Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Kayne Anderson BDC | 39.74% | 10.23% | 5.15% |
| Ares Capital | 42.56% | 9.89% | 4.66% |
Earnings and Valuation
This table compares Kayne Anderson BDC and Ares Capital”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Kayne Anderson BDC | $235.82 million | 3.88 | $93.71 million | $1.33 | 10.28 |
| Ares Capital | $3.05 billion | 4.23 | $1.30 billion | $1.86 | 9.66 |
Ares Capital has higher revenue and earnings than Kayne Anderson BDC. Ares Capital is trading at a lower price-to-earnings ratio than Kayne Anderson BDC, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Kayne Anderson BDC has a beta of 0.23, meaning that its stock price is 77% less volatile than the S&P 500. Comparatively, Ares Capital has a beta of 0.59, meaning that its stock price is 41% less volatile than the S&P 500.
Analyst Ratings
This is a breakdown of recent ratings for Kayne Anderson BDC and Ares Capital, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Kayne Anderson BDC | 0 | 1 | 3 | 0 | 2.75 |
| Ares Capital | 0 | 2 | 7 | 0 | 2.78 |
Kayne Anderson BDC presently has a consensus target price of $15.00, indicating a potential upside of 9.72%. Ares Capital has a consensus target price of $21.38, indicating a potential upside of 19.01%. Given Ares Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Ares Capital is more favorable than Kayne Anderson BDC.
Insider and Institutional Ownership
27.4% of Ares Capital shares are owned by institutional investors. 3.1% of Kayne Anderson BDC shares are owned by company insiders. Comparatively, 0.5% of Ares Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
Summary
Ares Capital beats Kayne Anderson BDC on 11 of the 16 factors compared between the two stocks.
About Kayne Anderson BDC
Kayne Anderson BDC Inc. is a business development company which invests primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Kayne Anderson BDC Inc. is based in CHICAGO.
About Ares Capital
Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.