On September 4, 2020, we bought an additional 20 shares of Ares Capital Corporation (ARCC) paying $13.99 per share for my Mom's pension Fund. With its quarterly dividend payout of 0.4 dollars per share, this latest buy has a dividend yield of 10.43% (before tax) and will pay us an additional $8.00 (before tax) every quarter.
There are two simple reasons we…
On November 11, 2020, we bought an additional 20 shares of Ares Capital Corporation (ARCC) paying $15.508 per share for my Mom's pension Fund.
With its quarterly dividend payout of 0.4 dollars per share, this latest buy has a dividend yield of 10.32% (before tax) and will pay us an additional $8.00 (before tax) every quarter. Awesome.
There are two simple reasons we like this stock - it has a high dividend yield of about 10%, and we can trade both put and call options. ARCC has dividend payments in March, June, September, and December. We will get a small boost in these months.
Selling options is the main reason for acquiring ARCC. Once we will have 100 shares of ARCC we will start selling covered calls on it. It's planned to have 100 shares of ARCC in our portfolio by the end of 2020.
Nothing is granted but we are looking at an additional $20-$30 monthly income from this stock by selling covered calls in the future.
Using dollar-cost averaging our average cost per one ARCC share is $14.58
If we had 100 shares of ARCC today, we could sell December 18, 2020, covered call (monthly options) with a strike price of $16, to get a $0.20 premium. In case our shares would get called away on the expiry date we would realize $157.2 income in 37 days, that's a potential return of 10.78% since we started buying ARCC on August 12. About 30.66% annualized (not counting in dividend)
As I mentioned, we bought this stock for my mom's pension fund, there is an idea to reach about EUR 500/mo income by 2025. Will see. Now with this latest buy, we are talking about an additional $2.26/mo dividend income. Once we will have 100 shares it would rise up to $11.3/mo from dividend and if we add about $20-$30 from options trades, that would get us in total about $30-$40. I find it pretty nice. But time will show.
By now ARCC takes 4.33% from our US stock portfolio.
For the rest of the year, we are looking to take $6.8 (after tax) from this buy, which is about 0.18% from our $3,600 goal for 2020. Not the biggest addition to the portfolio, but every bit counts.
In total ARCC now contributes about $108.8 (after-tax) yearly to the dividend income portfolio.
2019 in Review and Financial Goals for 2020
About Ares Capital Corporation
Ares Capital Corporation (NASDAQ: ARCC) is a market-leading Business Development Company and one of the largest direct lenders in the U.S. Our dynamic global platform combines powerful origination capabilities and extensive knowledge to deliver comprehensive solutions to meet the distinct and underserved financing needs of private middle-market companies across a wide range of industries. As a patient, long-term investor with permanent capital, we are able to hold large positions and have the ability to offer sponsors and management teams enhanced certainty of execution.
