The share price is still in the $17s.
And yet our investment has generated a 75% return.
How did we do it?
We bought the “right” high-yield dividend payer.
In this instance, we bought Ares Capital Corp. (NASDAQ: ARCC), a business development company (BDC).
We explained BDCs this week in our first Income Freedom Masterclass training video (which you’ll find posted here.)
I’ll give you the abridged version.
BDCs are financial companies. They’re similar to banks: They borrow at one interest rate and then lend at a higher interest rate. They make money on the spread.
But there are differences.
BDCs lend only to other companies. Most are “middle-market,” private enterprises valued between $50 million to $500 million.
Income is the important difference to income investors.
BDCs pay higher-yield dividends than banks. They can pay dividends that yield up to 400% more.
As for Ares Capital, it pays an annual dividend that generates a generous 9% yield on investment.
We consider Ares Capital the best of breed. It’s certainly the largest of breed, with a portfolio fair value of $13.1 billion.
We’ve been with Ares Capital since February 2011. We haven’t suffered a day of regret.
The company has been unrelenting in paying its high-yield quarterly dividend. It has never been reduced. To the contrary, it’s been raised a few times during our holding period.
The quarterly dividend has even been augmented with the occasional special dividend.
Our strategy has been to simply sit back and collect high-yield dividends quarter after quarter.
Simple, but effective.
Over the past eight-and-half years, we’ve collected $12.48 in Ares Capital dividends. Those dividends produce a 75% return on our $17.29 investment.
Yes, but what about share-price appreciation?
That’s not the purpose. Ares Capital isn’t built for share-appreciation price.
BDCs are pass-through entities. All the income is funneled to investors. Growth can occur only by issuing more shares or more debt.
But that’s OK.
You buy Ares Capital for its immediate, proven high-yield income.
The continual flow of the high-yield dividends leads to real wealth.
Give us another three years and Ares Capital will have paid for itself with its high-yield dividends alone – and we still have our $17.29.
Of course, not all high-yield dividends are of Ares Capital quality. In fact, most are inferior.
You want to buy only the “right” high-yield-dividend payers. You want that dividend to be consistently covered by cash flow. You want to be assured that the dividend will be maintained. You to avoid the possibility of a dividend cut.
Perhaps you want to realize a 75% return on a high-yield investment.
Perhaps you want more.
Then join our free Facebook Group, the Income Freedom Masterclass.
We reveal the secrets to investing in the best dividend-paying stocks. We even reveal the names.
Our Facebook Group is perfect for you if you want your investments to generate an extra $2,000-to-$5,000 in monthly income.
The price is perfect – FREE. Click here for instant access.