Trinity Capital (NASDAQ:TRIN – Get Free Report) and Ares Capital (NASDAQ:ARCC – Get Free Report) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, analyst recommendations, risk, institutional ownership, profitability and earnings.
Dividends
Trinity Capital pays an annual dividend of $2.04 per share and has a dividend yield of 13.6%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.4%. Trinity Capital pays out 93.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Capital pays out 96.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Trinity Capital has increased its dividend for 1 consecutive years. Trinity Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Analyst Recommendations
This is a breakdown of recent ratings for Trinity Capital and Ares Capital, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Trinity Capital | 1 | 1 | 5 | 0 | 2.57 |
| Ares Capital | 0 | 3 | 7 | 0 | 2.70 |
Insider & Institutional Ownership
24.6% of Trinity Capital shares are owned by institutional investors. Comparatively, 27.4% of Ares Capital shares are owned by institutional investors. 6.4% of Trinity Capital shares are owned by insiders. Comparatively, 0.5% of Ares Capital shares are owned 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.
Risk & Volatility
Trinity Capital has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500. Comparatively, Ares Capital has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500.
Earnings & Valuation
This table compares Trinity Capital 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 | |
| Trinity Capital | $237.69 million | 4.79 | $115.60 million | $2.19 | 6.87 |
| Ares Capital | $2.99 billion | 4.89 | $1.52 billion | $2.00 | 10.22 |
Ares Capital has higher revenue and earnings than Trinity Capital. Trinity Capital is trading at a lower price-to-earnings ratio than Ares Capital, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Trinity Capital and Ares Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Trinity Capital | 50.49% | 15.51% | 7.00% |
| Ares Capital | 45.16% | 10.08% | 4.80% |
Summary
Trinity Capital beats Ares Capital on 9 of the 17 factors compared between the two stocks.
About Trinity Capital
Trinity Capital Inc. is a business development company. It is a venture capital firm specializing in venture debt to growth stage companies looking for loans and/or equipment financing. Trinity Capital Inc. was founded in 2019 is based in Phoenix, Arizona with additional offices 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.
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