Beyond Ares Capital Stock: This Is An Even Better Buy Today

By Leo Sun – Feb 10, 2026 at 12:02PM ESTKey PointsAres’ high yield will be hard to sustain as interest rates decline.Realty offers a lower, but more sustainable yield with a healthier underlying business.We’re bullish on these 10 stocks ›NASDAQ: ARCCAres CapitalMarket Cap$14BToday's Changeangle-down(2.34%) $0.46Current Price$19.93Price as of February 10, 2026 at 1:43 PM ETRealty Income is a more sensible income investment.Ares Capital (ARCC +2.34%), the world's largest business development corporation (BDC), attracts many income investors with its forward dividend yield of 9.9%. However, it's becoming harder to sustain that massive yield as interest rates decline. As a BDC, Ares finances "middle market" companies, which often struggle to secure loans from conventional banks because they're classified as higher-risk clients. It currently invests in 603 companies across its $29.5 billion portfolio. To reduce its credit risk, it allocates 60.5% of its portfolio to first-lien secured loans and 5% to second-lien secured loans. Image source: Getty Images. Ares' business is well diversified, but its floating-rate loans track the Fed's benchmark rate. To generate consistent profits, those rates must stay in a "Goldilocks" zone. Higher interest rates boost Ares' net income, but they also create macro headwinds for its portfolio companies and make its dividend-paying shares less attractive than fixed-income investments. After raising its benchmark rate 11 consecutive times in 2022 and 2023, the Fed reduced it 6 straight times in 2024 and 2025. That pressure reduced Ares' EPS from $2.68 in 2023 to $1.86 in 2025 -- which falls short of its forward dividend rate of $1.92 per share. ExpandNASDAQ: ARCCAres CapitalToday's Change(2.34%) $0.46Current Price$19.93Key Data PointsMarket Cap$14BDay's Range$19.48 - $19.9552wk Range$18.26 - $23.63Volume129KAvg Vol5.2MGross Margin75.68%Dividend Yield9.86% Ares' stock looks cheap at 10 times forward earnings, but other dividend-paying blue chip stocks look more attractive right now. One of those stocks is Realty Income (O +0.89%). Why is Realty Income a better buy? Realty Income, which owns more than 15,500 commercial properties in the U.S. and Europe, is one of the world's largest real estate investment trusts (REITs). REITs simply buy a lot of properties, rent them out, and split that income with their investors. REITs and BDCs both need to pay out at least 90% of their taxable income as dividends to maintain a lower tax rate. But as interest rates decline, REITs generally grow faster than BDCs because it becomes cheaper to purchase new properties and easier to secure new tenants. ExpandNYSE: ORealty IncomeToday's Change(0.89%) $0.56Current Price$63.65Key Data PointsMarket Cap$58BDay's Range$62.98 - $63.7052wk Range$50.71 - $63.90Volume2.3MAvg Vol6.3MGross Margin48.14%Dividend Yield5.12% Realty's top tenants include 7-Eleven, Dollar General, and Walgreens. Some of its weaker tenants grappled with store closures in recent years, but its stronger tenants are offsetting that pressure by opening new stores. That's why Realty Income has maintained an occupancy rate above 96% since its IPO in 1994. It's also one of the few REITs that pays monthly dividends rather than quarterly ones, and it has raised its payout 133 consecutive times since its public debut. It pays a forward yield of 5.1%. Realty, like most other REITs, gauges its profitability by its adjusted funds from operations (FFO) per share rather than its EPS. It expects its AFFO per share to rise 1%-2% to $4.25-$4.27 in 2025, comfortably covering its forward dividend rate of $3.22 per share. It still looks like a bargain at 15 times its trailing AFFO per share, and it should remain a better income play than Ares this year.Read NextFeb 5, 2026 •By Matt DiLalloThis 10%-Yielding Dividend Stock is Coming Off a Record Year With Lots Of Momentum in 2026Feb 2, 2026 •By Keith SpeightsWall Street Warns About a Possible Private Credit Collapse.

Should Investors Worry About These Ultra-High-Yield Stocks?Jan 28, 2026 •By Matt DiLallo3 Under-the-Radar Dividend Stocks With Monster Yields of Up to 10.7%Jan 26, 2026 •By Matt DiLalloShould You Buy Ares Capital Corporation While It's Below $22?Jan 26, 2026 •By Keith SpeightsWhy I Just Loaded Up on This 9.2%-Yielding Dividend StockJan 25, 2026 •By Reuben Gregg BrewerIs Ares Capital Stock a Buy Now?About the AuthorLeo Sun is a contributing Motley Fool stock market analyst who has worked with the company since 2013, covering technology, consumer goods, industrial, and financial sectors. He became a self-made millionaire by age 40 through long-term investing, crediting lessons from Warren Buffett and Peter Lynch. Leo is a regular guest on CNBC Asia providing stock analysis on Chinese technology companies, including Tencent, Baidu, and Alibaba. He previously wrote for InvestorGuide and holds a bachelor’s degree in English from the University of Texas at Austin.TMFSunLionX@TMFSunLionStocks MentionedAres CapitalNASDAQ: ARCC$19.93 (+2.31%) $+0.45Realty IncomeNYSE: O$63.65 (+0.89%) $+0.56Dollar GeneralNYSE: DG$147.05 (0.22%) $0.32Seven & IOTC: SVNDY$15.01 (0.14%) $0.02*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.