ARCC Stock: Dividend vs Core EPS, NAV and Non-Accruals, Q2 2026

What ARCC is, and what it is not

ARCC is the largest exchange-listed BDC by market capitalization at June 30, 2026, according to its own release. It lends mostly to private-equity-backed middle-market companies: 619 portfolio company investments and 273 sponsors at June 30, 2026, with 59% of fair value in first lien loans, 4% in second lien, 6% in senior subordinated loans, 8% in preferred equity, 9% in other equity, 4% in subordinated certificates of the Senior Direct Lending Program (SDLP) and 10% in Ivy Hill Asset Management (IHAM), an asset manager ARCC owns. It is a separate company from Ares Strategic Income Fund, the non-traded BDC: ARCC's shares trade every day, and the fund's cannot be sold except in its tender offers. For the whole listed universe see our list of BDC stocks; for how the sector's non-accruals and PIK compare, our private credit census.

The 10-K says the loans ARCC makes are not rated and “would be below investment grade” if they were. ARCC therefore does not publish an investment-grade versus below split; it publishes its own 1-to-4 grades, used below.

Eleven quarters: dividend, Core EPS, NII and NAV

Every row is from that quarter's earnings release (an 8-K exhibit). Core EPS is a non-GAAP measure the company defines as the net increase in stockholders' equity from operations excluding realized and unrealized gains and losses, the capital gains incentive fee tied to them, and related income taxes. The cover columns divide by the $0.48 dividend (our arithmetic).

* Q2 2024 NII was $0.58 in the release of that quarter and is $0.62 in the comparative column of the Q2 2025 release; Q4 2024 NII dollars moved from $359 million to $363 million with $0.55 per share in both, and full-year 2024 NII per share from $2.25 to $2.30. GAAP net income and Core EPS did not change; the releases move amounts between NII and net realized gains, and we found no explanation in them. Core EPS is the cleaner series.

Three things follow. First, the dividend has not moved: $0.48 in each of the eleven quarters, and the third-quarter 2026 declaration of July 29 (record date September 15, payable September 30) repeats it. The CEO's line in the release is “17 years of stable or increasing regular quarterly dividends.” In Q4 2022 the total included an extra $0.03 and in 2022 extras of $0.12 in all.

Second, earnings per share moved down 25.4%, from $0.63 to $0.47 (our arithmetic), while NAV per share rose $0.11 (0.6%) to $19.35. Over the ten quarters since December 2023, NAV change plus $4.80 of dividends declared is $4.91 on a $19.24 starting NAV, about 25.5% (our arithmetic, not a market return). The dividend has been funded by earnings, but with less margin each year.

Third, NII flatters the last two quarters. The Q2 2026 release gives Core EPS of $0.47 and NII of $0.50; Schedule 1 shows the $0.03 difference is the capital gains incentive fee. That fee is accrued under GAAP on unrealized gains, so when the portfolio is marked down, the accrual reverses: the income statement shows a $21 million credit in Q2 and $82 million for six months, and no capital gains incentive fee payable at June 30 against $82 million at December 31, 2025. NII covering the dividend by 104% in Q2 is real in the filings; the 10-Q says the GAAP accrual includes unrealized appreciation, so the credit would reverse if marks recovered.

Why Core EPS fell: yields, shares and interest

The table compares the fourth quarter of 2023 with the second quarter of 2026. Investment income grew less than the cost of the capital behind it.

In the 10-Q the weighted average yield on the portfolio at amortized cost was 9.5% for the second quarter against 10.1% a year earlier, and the average debt balance was $16.1 billion against $14.1 billion at an unchanged 4.9% stated rate. Capital structuring fees, which are one-time, were $40 million and the average fee percentage on new commitments 2.1% against 1.5%, so some of Q2's income is fee-driven. The company issued no shares in the first half of 2026; the 718 million shares outstanding compare with 672 million at the end of 2024.

PIK: income that is not cash

PIK income is interest or dividends added to the balance rather than paid. ARCC reports PIK interest and PIK dividends in three separate groups of lines. The table adds them (our arithmetic) from the 10-Q income statements; the two fourth quarters are the full year less nine months.

PIK has stayed in a 14.8% to 17.7% band of investment income across ten quarters; it has not run away, and it has not fallen. In Q2 2026 the $121 million is equal to 35.1% of the roughly $345 million dividend declared for the quarter and 33.7% of NII (our arithmetic). That is accrued income, and the 10-Q is plain about who bears the risk: “The Company’s investment adviser is not under any obligation to reimburse the Company for any part of the income based fee it received that were based on accrued income that the Company never actually received.” Pre-incentive fee NII, on which the fee is charged, includes PIK accruals. The fee is 20% of income above a 1.75% quarterly hurdle on net assets with a catch-up; the base fee is 1.5% of total assets on leverage up to 1.0x debt-to-equity and 1.0% above. In 2025 the adviser's fees were $425 million base and $348 million income based (10-K).

Non-accruals and the adviser's own grades

ARCC reports non-accruals as a percentage, not a dollar list: 2.4% at amortized cost and 1.4% at fair value at June 30, 2026. Applied to the portfolio totals of $29,675 million at cost and $29,349 million at fair value, that is roughly $712 million at cost and $411 million at fair value (our arithmetic from rounded percentages, so treat as about plus or minus $60 million and $15 million). In December 2025 the same arithmetic gives about $526 million and $354 million.

Two readings. First, the share at cost is the highest in the eleven quarters and 1.85 times the December 2023 level (1.3% to 2.4%). The July 29 release calls the position “historically low levels of non-accruing loans and problem assets”; our series starts in December 2023 and cannot test that against longer history, but it shows the level now at the top of it. Second, the grading is moving the same way: grades 1 and 2 (risk to recouping cost has “increased materially” or “substantially”) fell from 6.4% to 2.8% in 2024 and early 2025 and have climbed to 5.4%, $1,582 million, with 33 companies graded 1. The weighted average grade is unchanged at 3.1.

Software. Software and Services is the largest industry at 22.0% of fair value, down from a 25.4% peak in September 2024. The ten largest industries at the last two dates:

Two software marks stand out. Of the $527 million net unrealized depreciation on investments the 10-Q itemizes for the first half of 2026, Cornerstone OnDemand was $106 million and Symplr Software $81 million, together 35.5% of it (our arithmetic). The second-quarter realized loss list is led by Eagle Football Holdings at $70 million, offset by $43 million of gains on Global Medical Response. The 10-Q's forward-looking list names “the impact of the development and use of artificial intelligence and potential impact to certain of our portfolio companies” as a risk; it does not quantify it.

Ivy Hill and the SDLP: a growing share of income comes from affiliates

IHAM is ARCC's wholly owned asset manager; it had $16.3 billion of assets under management and 24 vehicles at June 30, 2026. ARCC's investment in it was $2,843 million at fair value against $2,434 million in December, 10% of the portfolio. In the second quarter ARCC earned $76 million of dividends and $19 million of interest from IHAM (the interest was $1 million a year earlier): together $95 million, 12.4% of the $768 million of investment income, and the dividend alone is 21.2% of NII (our arithmetic). ARCC's subordinated loan to IHAM went from $531 million to $946 million, with a commitment of up to $1.0 billion at ARCC's discretion. IHAM and its vehicles bought $2,128 million of loans from ARCC in the first half (against $1,371 million a year earlier), $1,087 million of that in the second quarter.

The SDLP, the program in which ARCC co-invests with Varagon Capital Partners and its clients, now lends to 72 borrowers against 39 in December; ARCC sold it $361 million of loans in the second quarter, and one SDLP loan is on non-accrual for the first time in this comparison. These flows are normal for a large manager, but they mean part of ARCC's income and exits are transactions with entities it owns or co-owns. The 10-Q says IHAM vehicles buying from ARCC must obtain approval from unaffiliated third parties.

Debt, liquidity and the next maturities

At June 30, 2026 ARCC had $15,924 million of debt principal, $383 million of cash and about $6.7 billion available on its credit facilities, subject to borrowing-base limits. Asset coverage was 186% against the 150% legal minimum. The release puts available liquidity at about $6.0 billion after the July repayment of $1,000 million of 2.150% notes.

Three points from the filings. The cheap debt is leaving: $1,150 million of 3.875% notes were repaid in January 2026 and $1,000 million of 2.150% notes in July, while the notes issued since January 2025 carry effective rates of 5.1% to 5.4% including swaps and, on September 15, 2026, a 6.250% coupon. The weighted average stated rate was 4.8% at June 30 against 4.9% in December and interest and credit facility fees were $214 million in Q2 against $188 million. Second, the revolver was extended in May 2026 to May 2031 for lenders holding about $4.2 billion of revolving commitments, and the company launched a commercial paper program of up to $1.0 billion that had nothing outstanding at June 30. Third, the unsecured ladder has $1.4 billion in 2027 (January 15 and June 15) and then $1.25 billion in 2028; the September 2026 notes are intended to repay credit-facility borrowings.

Commitments are the other side of liquidity: $4,769 million of net unfunded revolving and delayed draw loan commitments (December: $5,190 million) and $124 million of net unfunded equity commitments. Backlog at July 23 was about $1.5 billion.

What changed in the June 30, 2026 10-Q

• The incentive fee was deferred, a first among the ten filings we read. (The Q1 2024 to Q1 2026 10-Qs and the 2024 and 2025 10-Ks show no deferred amount.) The adviser's cash fee is deferred if, over the last four quarters, distributions plus the change in net assets are under 7.0% of beginning net assets. For Q2 2026 the 10-Q states the $84 million income based fee was deferred; the March 2026 10-Q describes the rule but names no deferred amount. A rough check (our arithmetic, per share rather than the contract's definition): $1.92 of dividends over the four quarters plus a NAV change of -$0.55 ($19.90 to $19.35) is $1.37, or 6.9% of $19.90. The fee is still expensed in NII; the deferral only delays the cash.
• Two stockholder derivative suits. Item 1 of the 10-Q describes a May 26, 2026 action in the Southern District of New York alleging the adviser received excessive fees in violation of Section 36(b) of the Investment Company Act. A second verified derivative complaint, filed August 14, 2026 in the District of Maryland (case 1:26-cv-03231), was copied to the SEC on Form 40-33 on August 21. It alleges, among other things, that fees tied to accrued PIK income and valuation judgments are excessive and quotes fees of $773 million in 2025 ($425 million base, $348 million income based; both figures match the 10-K). These are allegations; the adviser disputes them, and the 10-Q says the outcome is uncertain and that the first action seeks disgorgement of fees, injunctive relief and rescission of the advisory agreement.
• Financing. In Q2 ARCC issued $800 million of January 2030 notes at 5.550%, amended its revolver, raised the BNP facility from about $1.3 billion to $1.5 billion and set up the commercial paper program. In July it refinanced the April 2036 CLO into July 2038 notes and repaid the $1,000 million notes.
• Buying shares for the dividend plan in the market. In April 2026 ARCC bought 1,192,850 shares at an average $17.80 to satisfy the reinvestment portion of its dividends. It repurchased none under its $1.0 billion program. The 10-Q gives a July 23 close of $18.61, 3.82% under June 30 NAV.
• Next report. The company reported Q3 2025 on October 28, 2025; as of October 15, 2026 the latest filings on EDGAR are the Q2 10-Q of July 29 and the September 15 8-K.

Spillover income and other questions the filings do not answer

Several third-party notes discuss ARCC's “spillover.” The 10-K and the two 10-Qs we read do not contain the word, or a dollar figure for undistributed taxable income. What the filings do show: accumulated undistributed earnings of $531 million on the balance sheet (against $958 million in December, a book figure, not tax spillover), excise tax expense of $37 million for 2025, and the statement that ARCC “may choose to carry forward” taxable income and pay the excise tax. If you want a spillover number you need the company's presentation, which is not an SEC filing. The filings also do not give a target leverage range, an investment-grade share of loans (see above) or the names of non-accrual loans in a list; they flag them only in footnotes to the schedule of investments.

How ARCC compares with non-traded funds

The reader who also owns a non-traded BDC or interval fund sees one structural difference: ARCC's holders can sell at the market price on any trading day, so a drop in NAV or a miss on coverage shows up as a price discount immediately (3.82% under NAV on July 23, per the 10-Q), where a non-traded fund shows it in NAV marks and in tender proration. ARCC's leverage of 1.15x and its 59% first lien weight can be set beside the funds in our non-traded BDC list and the Ares Strategic Income Fund page. The census linked above compares non-accruals and PIK across 36 BDCs.

What a holder or reader can do with this

This is a checklist built from the filings, not a recommendation.

• Track Core EPS, not only NII. Core EPS has been under $0.48 for two quarters; NII has been at or over it in eleven of eleven quarters. Which one the board looks at is the board's call; the next releases will show whether the $0.03 fee credit repeats.
• Watch grades and non-accruals together. Non-accruals at cost are a lagging measure. Grades 1 and 2 at 5.4% of fair value are a leading one, and both rose in the first half.
• Read the fee deferral line. If it appears again, the 7.0% test is binding; if NAV recovers, it should disappear.
• Check the dividend-reinvestment mechanics. In a period when the stock trades under NAV, ARCC buys shares in the market for the plan, as in April. The tax treatment of a dividend taken in stock is in the 10-K risk factors; read your year-end tax statement (see our 1099-DIV timeline).
• Mind the next dates. Results for the quarter ended September 30, 2026 had not been filed as of October 15; the notes due January 15, 2027 are $900 million.

FAQ

All figures are from Ares Capital Corporation's SEC filings read on EDGAR on October 15, 2026: the earnings releases (Exhibit 99.1 to the 8-Ks) for Q4 2023 through Q2 2026 (accessions 0001287750-24-000009, -24-000026, -24-000037, -24-000053, 0001287750-25-000004, -25-000018, -25-000036, -25-000044, 0001287750-26-000004, 0001628280-26-027685 and 0001628280-26-050303); the Forms 10-Q for March, June and September 2024 and 2025 and March and June 2026 (the latter accession 0001628280-26-050307); the Forms 10-K for 2024 and 2025 (accessions 0001287750-25-000007 and 0001287750-26-000006); the 8-K of September 15, 2026 (accession 0001104659-26-107911); and the copy of a derivative complaint filed on Form 40-33 on August 21, 2026 (accession 0001104659-26-099704). Ratios, sums across quarters, PIK totals and per-share effects are our arithmetic. Core EPS is the company's non-GAAP measure. Allegations in lawsuits are allegations. This is analysis of public documents, not investment, legal or tax advice.