Quick Read
-
ARES has fallen 25% year to date, yet its quarterly dividend has tripled since 2021 and just rose another 20%, now yielding 4.25%.
-
ARES yields nearly as much as BX at 4.59% but grows its dividend far faster than KKR, which yields just 0.82%.
-
CEO Michael Arougheti says growth is the primary goal, with AUM hitting $671B and FRE targeted to expand 16% to 20%.
-
Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)
Ares Management (NYSE:ARES) closed at $116.57 on October 1. The shares are down 25.42% year to date, even though the company keeps setting fundraising records. The dividend has kept rising while the price has fallen. That combination forces a shareholder to decide what this stock is for.
How Ares Actually Makes Money
Ares is an alternative asset manager. It raises money from pensions, insurers and rich families, then invests it outside public stocks and bonds. Its main engine is private credit, which means loans made directly to companies instead of through banks. The Credit Group brought in $722.4M of second-quarter revenue, up 14%.
Ares earns money in two very different ways. Management fees are charged on the assets it manages. After costs, those fees become fee-related earnings (FRE), and they repeat every quarter. Performance income is Ares’s share of profits when investments are sold, so it arrives in uneven chunks.
In Q2, FRE rose 20% to $491.1M. Realized net performance income came to about $51 million, and management expects roughly $10 million in Q3. The steady stream is what pays the dividend. About 94% of management fees come from perpetual capital or long-dated funds, meaning money that investors cannot pull out quickly.
Learn 7 Ways To Generate Income With A $1,000,000+ Portfolio
If you’ve saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
A Dividend That Grows Like a Growth Stock
Ares pays $1.35 per quarter after a 20% raise. The quarterly payout was $0.47 in 2021, $0.77 in 2023 and $1.12 in 2025. The stock yields 4.25%, compared with 4.59% at Blackstone (NYSE:BX) and 0.82% at KKR (NYSE:KKR).
Growth Engines Still Running Hot
Total AUM reached $671.3B, up 17%. Ares raised a record $36.4B in the quarter and holds $170B of dry powder. FRE margin expanded to 42.2% from 41.2%. Management targets 16% to 20% FRE growth.
Leave a comment