Tom Reese/Paul Rubillo, Dividend.com
Allied Capital Corp (ALD) is taking a 35% hit to its stock today, as one of its lending clients, Ciena Capital LLC, has filed for Chapter 11 bankruptcy protection.
Ciena Capital was specializing in loans of up to $10 million for commercial real estate projects and small businesses.
Allied said it plans to pay about $320 million due under Ciena's revolving credit agreements with its lenders, and Allied will continue to guarantee a remaining balance of about $10 million.
The Bottom Line
This big hit the stock is taking is a concern for us, considering Ciena is just one of the nearly 200 companies that are in Allied Capital Corp's portfolio. We would avoid the lure of the high dividend yield and look elsewhere for now.
Allied Capital Corp (ALD) is not recommended at this time, holding a Dividend.com Rating of 2.8 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system here.
