Ares Capital (NASDAQ:ARCC) vs. Virtus Global Multi-Sector Income Fund (NYSE:VGI) Head-To-Head Analysis

Virtus Global Multi-Sector Income Fund (NYSE:VGI) and Ares Capital (NASDAQ:ARCC) are both financial services companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, analyst recommendations, profitability and institutional ownership.

Insider & Institutional Ownership

27.4% of Ares Capital shares are held by institutional investors. 0.6% of Ares Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Virtus Global Multi-Sector Income Fund pays an annual dividend of $0.96 per share and has a dividend yield of 11.9%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 8.9%. Ares Capital pays out 65.8% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of current ratings and price targets for Virtus Global Multi-Sector Income Fund and Ares Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Virtus Global Multi-Sector Income Fund	0	0	0	0	N/A
Ares Capital	0	3	5	1	2.78

Ares Capital has a consensus target price of $21.71, indicating a potential upside of 0.67%. Given Ares Capital’s higher probable upside, analysts plainly believe Ares Capital is more favorable than Virtus Global Multi-Sector Income Fund.

Earnings and Valuation

This table compares Virtus Global Multi-Sector Income Fund and Ares Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Virtus Global Multi-Sector Income Fund	$8.97 million	N/A	N/A	N/A	N/A
Ares Capital	$1.86 billion	7.15	$1.52 billion	$2.92	7.39

Ares Capital has higher revenue and earnings than Virtus Global Multi-Sector Income Fund.

Profitability

This table compares Virtus Global Multi-Sector Income Fund and Ares Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Virtus Global Multi-Sector Income Fund	N/A	N/A	N/A
Ares Capital	59.76%	12.24%	5.83%

Summary

Ares Capital beats Virtus Global Multi-Sector Income Fund on 9 of the 11 factors compared between the two stocks.

About Virtus Global Multi-Sector Income Fund

Virtus Global Multi-Sector Income Fund is a closed ended fixed income mutual fund launched by Virtus Investment Partners, Inc. The fund is co-managed by Virtus Investment Advisers, Inc. and Newfleet Asset Management, LLC. It invests in fixed income markets across the globe. The fund invests in both investment grade and high yield debt instruments issued by the government, corporate, bank loans, mortgage-backed securities, asset-backed securities, taxable municipal bonds, and tax-exempt municipal bonds. It invests in securities with average duration which varies within three years (plus or minus) of the duration of the Barclays Global Aggregate Bond Index. The fund employs fundamental analysis with a top-down and bottom-up stock picking approach while focusing on factors such as yield and spreads, supply and demand, investment environment, sector fundamentals, assessment of credit risk, company management, issue structure, technical market conditions, and valuations to create its portfolio. It seeks to benchmark the performance of its portfolio against the Barclays Global Aggregate Bond Index. The fund was formerly known as Virtus-Newfleet Global Multi-Sector Income Fund. Virtus Global Multi-Sector Income Fund was formed on February 23, 2012 and is domiciled in the United States.

About Ares Capital

Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.