Ares Management: The Growth Stock Disguised as an Income Play
Ares Management keeps raising its dividend and breaking fundraising records even as its stock slides 25% this year, which raises a question most investors in the company have not yet answered: what exactly are they holding?
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Ares Management (NYSE:ARES | ARES Price Prediction) 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.
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.
CEO Michael Arougheti stated: “Our primary goal is growth.”
What Investors Are Paying for Ares
Ares trades at a forward P/E of 17, against 16 for Blackstone and 13 for KKR. The average analyst target is $147.3. Of analysts covering the stock, 12 rate it a buy or strong buy and 7 rate it a hold.
Verdict: A Growth Stock That Pays You to Wait
Ares is a growth stock. The dividend rises with fees and has grown every year since 2021. A yield near Blackstone’s comes with a dividend growing at about 20% annually.
A credit cycle downturn could slow fundraising, stall deployment and test investor commitment. Management highlighted this risk:
“There is a risk that some of the wealth flows could be more pro-cyclical than people thought they were, which is why we continue to index aggressively into the institutional market.”
The effective management fee rate has also fell, from 1.00% to 0.97%. Ares has scheduled its third-quarter release. Two numbers in that report will show whether the thesis holds: FRE growth inside the target range and fundraising on pace.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
