FS KKR Capital (FSK) Stock Overview
A business development company specializing in investments in debt securities. More details
| Snowflake Score | |
|---|---|
| Valuation | 2/6 |
| Future Growth | 3/6 |
| Past Performance | 0/6 |
| Financial Health | 1/6 |
| Dividends | 3/6 |
FSK Community Fair Values
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Analyst Price Targets
FS KKR Capital Corp. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$10.79 |
| 52 Week High | US$22.68 |
| 52 Week Low | US$9.72 |
| Beta | 0.90 |
| 1 Month Change | -2.44% |
| 3 Month Change | -2.97% |
| 1 Year Change | -50.50% |
| 3 Year Change | -46.05% |
| 5 Year Change | -48.59% |
| Change since IPO | -73.68% |
Recent News & Updates
Seeking Alpha • Jul 13
FS KKR Capital: 5 Reasons I'm Staying Away
Summary FSK's shareholders had a tough year as its stock price dropped by 50%. Non-accruals have surged to 8.1% on a cost basis, and top-performing investments dropped to ~90%, signaling deteriorating credit quality. Despite substantial dividend cuts, coverage is weak at just 1.0x, leaving little margin of safety and raising the risk of further cuts. Despite a deep 0.57x P/BV valuation, structural risks, concentrated exposures, and NAV declines outweigh potential upside. I have 5 reasons why I'm staying away from FSK. Read the full article on Seeking Alpha
Narrative Update • Jul 10
FSK: Dividend Reset And Legal Overhang May Set Up Future Re Rating
Analysts reduced their fair value estimate for FS KKR Capital from $18.00 to about $14.53, citing updated assumptions around revenue growth, margins, and future P/E that also contributed to recent reductions in published price targets. Analyst Commentary Recent Street research on FS KKR Capital highlights that, even with reduced fair value estimates, some bullish analysts still see room for the stock to re-rate over time as their updated assumptions filter through to market expectations.
Narrative Update • Jun 26
FSK: Future Earnings Profile And Margin Shift Will Drive Repricing
Analysts have cut their fair value estimate for FS KKR Capital to $11.50 from $17.33, citing lower revenue growth expectations, a reduced future P/E multiple, and a higher projected profit margin profile in their updated models. Analyst Commentary Recent Street research on FS KKR Capital points to a more cautious stance on the stock, with several firms revising their price targets lower.Recent updates
Seeking Alpha • Jul 13
FS KKR Capital: 5 Reasons I'm Staying Away
Summary FSK's shareholders had a tough year as its stock price dropped by 50%. Non-accruals have surged to 8.1% on a cost basis, and top-performing investments dropped to ~90%, signaling deteriorating credit quality. Despite substantial dividend cuts, coverage is weak at just 1.0x, leaving little margin of safety and raising the risk of further cuts. Despite a deep 0.57x P/BV valuation, structural risks, concentrated exposures, and NAV declines outweigh potential upside. I have 5 reasons why I'm staying away from FSK. Read the full article on Seeking AlphaNarrative Update • Jul 10
FSK: Dividend Reset And Legal Overhang May Set Up Future Re Rating
Analysts reduced their fair value estimate for FS KKR Capital from $18.00 to about $14.53, citing updated assumptions around revenue growth, margins, and future P/E that also contributed to recent reductions in published price targets. Analyst Commentary Recent Street research on FS KKR Capital highlights that, even with reduced fair value estimates, some bullish analysts still see room for the stock to re-rate over time as their updated assumptions filter through to market expectations.Narrative Update • Jun 26
FSK: Future Earnings Profile And Margin Shift Will Drive Repricing
Analysts have cut their fair value estimate for FS KKR Capital to $11.50 from $17.33, citing lower revenue growth expectations, a reduced future P/E multiple, and a higher projected profit margin profile in their updated models. Analyst Commentary Recent Street research on FS KKR Capital points to a more cautious stance on the stock, with several firms revising their price targets lower.
New Narrative • Mar 14
Nonaccrual Risks And AI Disruption Will Shape Future Returns For This Lender
Catalysts About FS KKR Capital FS KKR Capital is a business development company that provides primarily senior secured financing to upper middle market companies through a diversified corporate lending portfolio and a large joint venture. What are the underlying business or industry changes driving this perspective?New Narrative • Feb 28
Private Credit Shift And First Lien Focus Will Support Stronger FS KKR Capital Fundamentals
Catalysts About FS KKR Capital FS KKR Capital Corp. is a business development company that provides debt financing to upper middle market companies, primarily through first lien and other senior secured loans.Seeking Alpha • Apr 16
FS KKR Capital: How Good Is This 15% Yield?
Summary FS KKR Capital offers a high dividend yield of 15%, with shares trading at an inexpensive valuation, making it an attractive entry point. Despite a 12% decline in net investment income per share, the yield on debt investments remains high, stabilizing with current interest rates. The portfolio has become more diversified, but the non-accrual rate has risen to 2.2%, indicating potential risks. Even with a potential 20-30% dividend cut, the yield would remain in the double digits, maintaining its appeal for high-yield investors. Read the full article on Seeking AlphaSeeking Alpha • Mar 25
FS KKR Capital: Better High-Yield Options In The Sector (Rating Downgrade)
Summary FS KKR Capital Corp's credit quality has improved, but lingering borrower issues and economic uncertainty prompt a downgrade from buy to hold. Despite a 13% yield, FSK's non-accruals remain high, and a potential recession could further impact their financial stability and dividend safety. FSK's net asset value has declined significantly, and their dividend could be at risk if economic conditions worsen. Investors should consider rebalancing portfolios towards safer, recession-proof businesses amidst growing economic uncertainty. Read the full article on Seeking AlphaSeeking Alpha • Mar 11
FS KKR Capital: The Discount Is Not Enough, And Dividend Cut Likely
Summary Before FSK circulated its Q4 report, I issued a bearish piece, realizing my 27% returns and suggesting investors to avoid the investment. Since then the share price has increased by 5%, but the underlying fundamentals have become worse. Plus, Q4 was a miss. In this article I explain in more details why I still recommend investors to think twice before deploying capital in FSK stock. In my humble opinion, the dividend cut is likely to take place at the end of 2025 even though it should have happened now. Read the full article on Seeking AlphaSeeking Alpha • Mar 01
FS KKR: Q4 Earnings Warrant Caution (Rating Downgrade)
Summary FS KKR Capital is downgraded to a hold due to declining NAV, weakening net investment income, and a shrinking total asset value. FSK's portfolio strategy includes a diverse $13.5B portfolio with 63.8% in senior secured debt, benefiting from high-interest rates. Although non-accruals haven't substantially increased, we can see an uptick in PIK interest income. Dividend coverage is questionable with a narrow margin, relying on spillover income. Read the full article on Seeking AlphaSeeking Alpha • Feb 07
FS KKR: 12% Yield Is Attractive, And It Still Trades At A Discount Heading Into Earnings
Summary FSK is undervalued, trading at a discount to NAV, with strong NII and a high distribution yield, making it an attractive investment. FSK's portfolio is well-diversified, with 67% senior secured investments and 88.5% floating rate debt, protecting against interest rate changes. FSK is positioned to benefit from expected market conditions in 2025, with opportunities for increased originations and improved credit metrics. Despite risks, including rate sensitivity and opportunity cost, FSK's valuation and income potential make it a compelling buy heading into earnings. Read the full article on Seeking AlphaSeeking Alpha • Jan 07
FSK KKR Capital: 13% Yield Is Likely Safe, But Credit Quality Remains Questionable
Summary FSK KKR Capital's high yield appears sustainable, supported by improved non-accruals and a 7.6% discount to NAV, making it an attractive income investment. Despite solid Q3 performance, inflation and interest rate uncertainties could impact FSK's portfolio, potentially increasing non-accruals and affecting dividend safety. Questionable credit quality, including a Chapter 11 bankruptcy filing by a borrower, poses risks to FSK's dividend stability amid economic volatility. Ample liquidity and manageable debt maturities support FSK's dividend safety in the near to medium term, justifying a maintained buy rating. Read the full article on Seeking AlphaSeeking Alpha • Dec 09
FS KKR Capital: Improved Portfolio Quality, Strong Dividend Coverage
Summary FS KKR Capital's (FSK) portfolio quality has improved with a decrease in non-accrual rates, indicating higher average credit quality and strong earnings supporting a 13% dividend yield. The portfolio is diversified, with 67% in senior secured debt, and operates on a floating rate basis, sensitive to interest rate changes. Despite a slight decrease in NAV, FSK's management is actively investing in new deals. Future interest rate cuts may present growth opportunities for FSK, making it a good long-term investment despite current valuation and NAV growth concerns. Read the full article on Seeking AlphaSeeking Alpha • Dec 02
FS KKR Capital: A 13% Yield And Repricing Upside
Summary FS KKR Capital's improving asset quality and reduced non-performing loans have narrowed its discount to net asset value, making it an attractive investment. FS KKR Capital is a top 4 BDC in terms of market cap and has managed to lower its non-accrual percentage. FS KKR Capital's 13% yield is well-supported by net investment income, with a 7% discount to NAV still offering value for dividend investors. The biggest risk remains asset quality, but the improving non-accrual trend suggests FS KKR Capital is a promising BDC for dividend investors. Read the full article on Seeking AlphaSeeking Alpha • Nov 04
FS KKR: 15.91% Discount To NAV, Yields Around 14%, And One Of My Favorite BDCs
Summary The Fed has started to cut rates. Further rate reductions could lead to FSK's debt investments becoming more valuable. FSK trades at a 15.91% discount to NAV and if rates decline and debt appreciates, then it should increase FSK's NAV and push the share price higher. FSK continues to pay a special distribution on top of the $2.56 base distribution, and the amount of NII generated could allow FSK to pay special distributions into 2025. Read the full article on Seeking AlphaSeeking Alpha • Oct 03
FSK KKR Capital: The Improved 14.6% Yield Makes Them An Attractive Income Investment
Summary FSK KKR Capital Corp offers a near 15% forward yield, supported by solid fundamentals and improved portfolio metrics, making it an attractive income investment. The company has shown significant improvements in non-accruals and has increased liquidity while decreasing debt, positioning itself well for future economic headwinds. FSK trades at a 17.24% discount to NAV, providing an attractive entry point compared to peers trading at premiums. Despite potential recession risks, FSK's well-covered dividend and spillover income offer downside protection, making it a worthy buy for income-focused investors. Read the full article on Seeking AlphaSeeking Alpha • Sep 22
FS KKR: The Best 14% Yield In Town
Summary The Fed's rate cuts create opportunities in income-focused investments, with FS KKR offering a 14.2% annualized yield and trading at an 18% discount to book value. FS KKR's portfolio of secured loans to mid-market companies shows resilience, with improving nonaccrual rates and strategic shifts to sectors like healthcare and software. Despite potential income drops from floating rate debt, FSK's strong portfolio and management provide stability, making it a good play for yield seekers. Read the full article on Seeking AlphaSeeking Alpha • Sep 12
Ares Capital Corporation Vs. FS KKR: Only One Is A Buy
Summary Ares Capital and FS KKR are among the largest publicly traded BDCs and sport attractive dividends. I compare them side-by-side, including their sensitivity to impending Fed rate cuts. I share which one is a buy right now and which one is not. Read the full article on Seeking AlphaSeeking Alpha • Aug 20
FS KKR Capital: 14% Yield, Strike While The Iron Is Hot
Summary FS KKR Capital's share price declined at the beginning of the month due to economic concerns, but the BDC's Q2 earnings were strong. I maintain a strong buy rating for FSK due to improved asset quality, attractive total return potential, and a discounted share price. FS KKR Capital's non-accrual ratio dropped to 1.8%, showing a 2.4 PP improvement Q/Q. The dividend, regular and non-regular, are supported by NII. Read the full article on Seeking AlphaSeeking Alpha • Aug 08
FS KKR: Still My Top BDC Pick With A Yield Close To 15%
Summary At the start of this year, I wrote a bullish thesis on FS KKR Capital and labeled this BDC as my top pick for 2024. Since then the returns have been tightly correlated with the overall BDC market, lagging ~ 80 basis points below the BDC index.. However, looking at the Q2, 2024 earnings dynamics, the thesis has, in my opinion, become even more enticing. In this article explain why I remain very bullish on FSK. Read the full article on Seeking AlphaSeeking Alpha • Jul 01
FS KKR: Improvements In Non-Accruals And Portfolio (Rating Upgrade)
Summary FSK KKR Capital operates as a Business Development Company with a 13% dividend yield that is well-supported by net investment income. FSK shows slight portfolio improvements with diverse investments, focusing on senior secured debt and reducing exposure to real estate. The rate of non-accruals has improved over the quarter, making the portfolio of investments more attractive. FSK trades at an attractive discount to NAV of 19%. This may present an attractive entry point for new shareholders. Read the full article on Seeking AlphaSeeking Alpha • Jun 13
FS KKR Capital: 16% Discount To BV, 14% Yield, But There Are Risks
Summary FS KKR Capital Corp. reported a higher non-accrual ratio in December, leading to a stock classification change. Despite credit quality improvement, FS KKR Capital's dividend safety margin remains narrow. Stock selling at 16% discount to net asset value, but non-accrual ratio and credit issues may prevent re-rating. Read the full article on Seeking AlphaSeeking Alpha • May 28
FSK KKR Capital: Headwinds Persist, But Strong Dividend Coverage Makes Them A Buy
Summary FSK KKR Capital has made efforts to address its portfolio issues and has shown improvement in its latest earnings report. The company has increased its liquidity and made significant progress in restructuring troubled companies. FSK KKR Capital's financials remain strong, with solid dividend coverage and a discounted valuation compared to some of its peers. Non-accruals continue to be a problem, but management has plans in place to offset this. FSK has also been decreasing its exposure to first-lien loans but increasing its exposure to asset-based finance. Read the full article on Seeking AlphaSeeking Alpha • May 10
FS KKR: The Recovery Has Just Started And The Upside Is Still Huge
Summary Going into 2024, I made a detailed analysis comparing FSK with ARCC. The conclusion was that while both are attractive investment choices, FSK is better positioned to deliver superior return. So far, on a YTD basis, FSK's performance has been weak, mostly due to rising non-accruals. Yet, FSK's Q1 2024 earnings report shows strong operating and portfolio performance, with improving dynamics and stabilization of non-accruals. In this article I dissect the most recent earnings report and explain why I still remain bullish on FSK. Read the full article on Seeking AlphaSeeking Alpha • Apr 08
FS KKR: Recovering From The Drop And Generating Large Income Yielding 13.35%
Summary Shares of FS KKR Capital Corp declined after their Q4 2023 earnings report, but the author remains bullish on the stock. The decline in net investment income and the risk of loans going on non-accrual status are concerns for the author's investment thesis. The author believes FSK's management has shown the ability to adapt and navigate difficult situations, and the stock is still attractive compared to its peers in terms of valuation and income potential. Read the full article on Seeking AlphaSeeking Alpha • Mar 29
FS KKR: Q4, Huge Discount To NAV Justified But This BDC Remains A Great Income Play (Rating Downgrade)
Summary FS KKR Capital, the fourth largest BDC, has recently sold off due to rising non-accruals and a drop in net investment income. Despite these challenges, the BDC's dividend is safe and covered by NII, and its balance sheet remains in good shape with ample liquidity. The BDC is currently undervalued, making it an attractive income play for investors in search of higher yields. FSK's poor performance in Q4 also caused their NAV price to decline quarter-over-quarter, which also played a part in the sell-off. At the current valuation, the P/NAV ratio sits below their 3-year average, making the stock attractive for income-focused investors. Read the full article on Seeking AlphaSeeking Alpha • Mar 08
FS KKR: I Am Buying The Q4 Drop Hand Over Fist
Summary FS KKR has seen a valuation drawdown after reporting NII results that met expectations. An increase in the BDC's non-accrual percentage has raised fears of a dividend cut, but the current dividend is well-supported by cash flow. FS KKR's distribution coverage ratio in FY 2023 was 1.11X which reflects a low dividend risk. The BDC's shares are now priced at an exaggerated discount to NAV and trade below the 1-year average P/NAV ratio which presents a buying opportunity. Read the full article on Seeking AlphaSeeking Alpha • Mar 02
15%-Yielding FS KKR Capital: 3 Questions To Ask Before Buying The Dip
Summary FS KKR Capital Corp trades at a 24.2% discount to NAV with a well covered 15.4% dividend yield and considerable exposure to first-lien senior secured loans. Managed by KKR, one of the world's top alternative asset managers, FS KKR Capital has outperformed the broader BDC sector over the past three years. However, its latest quarterly results were quite bad, leading to the stock tanking. We look at three questions investors should ask before buying the dip in FS KKR Capital Corp shares. Read the full article on Seeking AlphaSeeking Alpha • Jan 29
FS KKR Capital Corp: Finding Opportunity In Every Difficulty
Summary KKR & Co. Inc. provides an optimistic outlook for 2024, highlighting opportunities in the credit market. FS KKR Capital, a BDC under the KKR umbrella, is recommended as a strong buy due to its high yield distribution and outperformance compared to peers. FSK has a current market cap of $5.8 billion, a discount to book value, and offers a current forward yield of about 12.5%. Read the full article on Seeking AlphaSeeking Alpha • Dec 30
FS KKR Capital: Is The Discount To NAV Justified Or Is This BDC A Bargain?
Summary Since my last coverage on FSK KKR Capital the BDC has been growing its portfolio impressively. Additionally, the BDC managed to decrease their non-accrual rates from Q1 to Q3, which is impressive considering the macro environment. They also have a strong balance sheet and well-laddered debt maturities with most debt maturing in 2025 & beyond. Although rates are expected to decline in 2024, I expect the higher-quality BDCs like FSK KKR to continue to perform well. I think FSK is a BDC who's quality should warrant a higher share price. Read the full article on Seeking AlphaSeeking Alpha • Dec 09
FS KKR Capital: A Christmas Gift With A 13% Yield
Summary FS KKR Capital is trading at a 20% discount to net asset value despite strong growth in net investment income in the last year. The BDC has a well-diversified portfolio focused on senior secured loans and a joint venture with similar assets. The dividend is well-supported by NII, but there is a risk from the Fed ending its tightening policy. Read the full article on Seeking AlphaSeeking Alpha • Nov 12
FS KKR: This Steep Discount Wouldn't Last For Long
Summary FS KKR Capital is a leading business development company with a market cap of $5.6B. The company delivered a solid third-quarter performance with a highly attractive NII per share multiple of 6.4x. Despite potential headwinds, the company's focus on upper-middle market companies and extended special distribution should strengthen investor sentiment. I assessed that significant pessimism has been priced in, with a best-in-class "A+" valuation grade. Given its market leadership, the steep discount is appealing. Dip buyers also aggressively bought its recent October lows, lending confidence to a further upward recovery. Investors should buy while it's still cheap. Read the full article on Seeking AlphaSeeking Alpha • Oct 19
FS KKR Capital: I Am Doubling-Down On This Stellar 14.4% Yielding BDC
Summary FS KKR Capital Corp. is trading at a 21% discount to NAV, making it an attractive option for passive income investors. The BDC's portfolio quality improved in the second quarter of 2023, and it has a solid financial performance. Despite concerns about a potential decline in NII and portfolio quality, FS KKR Capital's dividend strength and excess dividend coverage make it a good investment. Read the full article on Seeking AlphaSeeking Alpha • Oct 11
FS KKR's Distribution Has Crossed 13% And I Am Buying More
Summary Shares of FSK have declined by -4.53% since the last article, pushing its yield to 13.07%. FSK trades at a significant discount to its net asset value and has been selling off despite a higher for longer rate environment. The rising rate environment is beneficial for FSK as it provides a compelling reason for income investors to venture outside of risk-free assets. Read the full article on Seeking AlphaSeeking Alpha • Sep 25
FS KKR: 14% Stock Yield Or 8% Bond Yield?
Summary This is a series of articles discussing retirement portfolios using BDCs currently yielding around 12% and their safer notes, baby bonds/preferred shares with yield-to-maturities ranging from 6% to 9%. We discuss the interest expense and asset coverage ratios for one of the more popular BDCs as well as its 8 investment-grade bonds. I prefer bonds/notes (with CUSIPS) to the Baby Bonds (with tickers) due to the "make-whole premiums," compensating bondholders for the interest they would have earned if they were called/redeemed early. The following table shows some examples of allocations and my personal portfolio (not exact) with portfolio yields ranging from 5.2% to 9.4%. Read the full article on Seeking AlphaSeeking Alpha • Sep 07
FS KKR Has A Distribution Yield Of 12.51% And Is Undervalued
Summary FS KKR Capital Corp is the 2nd largest BDC by net assets and market cap, making it a popular choice among income investors. FSK delivered strong Q2 results, beating consensus estimates for net investment income and total investment income. FSK's portfolio and distribution yield make it an attractive investment, especially as the Fed considers easing rates. Read the full article on Seeking AlphaSeeking Alpha • Aug 17
FS KKR: 19% Discount To NAV, Growing Payouts, 12.7% Base Yield
Summary FSK is paying its common shareholders a 12.7% base dividend yield that was 122% covered by its fiscal 2023 second quarter adjusted net investment income. The BDC is currently swapping hands at a 19% discount to its net asset value. NAV per share of $24.69 did decline sequentially on the back of special distributions and adjusted NII that was flat versus the first quarter. Read the full article on Seeking AlphaSeeking Alpha • Aug 07
FS KKR Capital: The Road Ahead Looks Promising
Summary Although externally managed, management seems to be more aligned with shareholders with frequent special dividends when compared to their more conservative peer Ares Capital. FSK reported a rise in non-accruals in quarter-over-quarter, but the percentage is still below the KBW BDC average. The merger has resulted in NII growth and improved competitive positioning for FSK as the now second-largest BDC. FSK is trading at a huge discount to its NAV share price and pays a large dividend, which I think is safely covered. FSK has a healthy portfolio with a focus on first-lien loans, and a strong balance sheet with no debt maturities in 2023 and $3 billion in liquidity. Read the full article on Seeking AlphaSeeking Alpha • Jul 14
FS KKR Capital: The 13% Dividend Is Not As Juicy As You May Think
Summary FS KKR Capital Corp. is a $5.5 billion business development company focusing on providing tailored credit solutions to privately-held middle market companies in the United States. By most of the business metrics I looked at in my today's article, FSK KKR looks very stable. But given the nature of its portfolio and its debt, I think the recession, I expect in late 2023 or early 2024, will hit the company's bottom line hard. When I weigh the dividend yields against the leverage ratios of FSK and its peers, I conclude that this BDC is currently fairly valued. I rate FSK stock as a "Hold." Over the long term, you may like the yield. But there should be even better entry points. Read the full article on Seeking AlphaSeeking Alpha • Jun 12
FS KKR Capital: 20% Discount To Book Value, 12.9% Dividend Yield Compensate For Weaknesses
Summary FSK's management fees align with shareholder interests, and its assets are predominantly conservative with a focus on senior secured loans. FSK's assets are diversified across industries, with a low cost of liabilities and stable balance sheet leverage. The BDC has experienced more NAV volatility in the past, and has exposure to cyclical industries, but its current discount and high dividend yield may compensate for this weakness. Read the full article on Seeking AlphaSeeking Alpha • Jan 22
FS KKR Capital: Buy This 12.9% BDC Yield At A 26% Discount To BV
Summary FS KKR is an average business development company. The BDC earns its dividend with adjusted net investment income. The discount to net asset value may be exaggerated. FS KKR Capital Corp. (FSK) is trading at a 26% discount to book value and currently pays a 12.9% dividend yield that is covered by the company's adjusted net investment income. Even though the discount to net asset value was higher in September than it is now, I believe the large discount reflects a high margin of safety for passive income investors, which could lead to double-digit stock returns for shareholders in addition to the 12.9% dividend yield. Portfolio Composition In comparison to some of its BDC peers, FS KKR does not have the greatest exposure to First Lien Senior Secured Loans in its portfolio. Business development companies with higher First Lien percentages, such as Blackstone Secured Lending (BXSL) or Oaktree Specialty Lending Corporation (OCSL), offer passive income investors higher overall portfolio quality, which translates into lower loan default risks. As of September 30, 2022, FS KKR had invested 61.9% of its capital in First Lien Senior Secured Loans, 7.9% in Second Lien Senior Secured Loans, and the remainder in subordinated debt, asset backed finance, Credit Opportunities Partners, and Preferred Equity. As of the end of the third quarter, FS KKR's total portfolio value was $15.8 billion, with 195 portfolio companies. Portfolio Highlights (FS KKR Capital Corp) Only 49% of the BDC's third-quarter investments went to the safest debt form, First Lien Senior Secured Loans, while 20% went to subordinated debt. This type of debt offers higher yields to debt investors, but also higher investment risk because some borrowers may not repay the loan in full. Some higher-quality BDCs have changed their portfolio compositions in favor of safer First Lien investments in the last year, owing to concerns about an impending recession in 2023. FS KKR does not feel the need to position its portfolio more safely (less than half of 3Q-22 investments have been made in First Liens), indicating that portfolio and dividend coverage risks are higher than average. Asset Mix Of new Purchases (KS KKR Capital Corp) FS KKR, like most business development firms, prioritizes investments in sectors that are less cyclical and provide more predictability in terms of earnings and cash flow. FS KKR has a high exposure to the software and services, capital goods, health care, and insurance sectors, which promise lenders less cash flow volatility and, as a result, a higher chance of full loan repayment. Sector Exposure (FS KKR Capital Corp) Dividend Coverage FS KKR earned $2.77 per share in adjusted net investment income over the last four quarters while paying out $2.66 per share, or $0.67 per share on average. As a result, the dividend pay-out ratio over the last twelve months was 96.0%, indicating that FS KKR fully covered its dividend with adjusted NII. While there are other business development companies with pay-out ratios less than 96%, I believe FS KKR's dividend is sustainable as long as the BDC's debt portfolio quality does not deteriorate. Financial Results (KS KKR Capital Corp) 26% Discount To Book Value For the past year, FS KKR Capital has been selling at a discount to net asset value, and the current discount is not even the largest it has ever been. The BDC's discount to net asset value widened to 36% during the September selloff, but even though it has narrowed recently, it is still large enough to provide passive income investors with a high margin of safety, in my opinion.Seeking Alpha • Jan 04
Better High Yield Buy: FS KKR Or Owl Rock Capital?
Summary Both Owl Rock Capital Corporation and FS KKR Capital Corp offer high dividend yields. Both also boast investment-grade credit ratings. We compare them side by side and share our take on which is the better buy today. Both Owl Rock Capital Corporation (ORCC) and FS KKR Capital Corp (FSK) are high-yield business development companies (i.e., BDCs) (BIZD). Both also boast investment-grade credit ratings as well as the backing of world-class alternative asset managers in Blue Owl Capital (OWL) and KKR & Co. (KKR). We compare them side by side and share our take on which is the better buy today. FS KKR Vs. Owl Rock - Balance Sheet Both FSK and ORCC have some of the stronger balance sheets in the BDC sector, as evidenced by their investment grade credit ratings. FSK's debt-to-equity ratio is currently 1.19x and its balance sheet has plenty of flexibility, with $2.75 billion of total available liquidity (19.8% of its enterprise value). ORCC's debt-to-equity ratio is roughly equivalent to FSK's at 1.18x, and the company also has plentiful liquidity of $2.1 billion (18.3% of its enterprise value). Both businesses have similarly constructed balance sheets with similar leverage ratios and liquidity pools relative to their enterprise values. FS KKR Vs. Owl Rock - Business Models An important item to keep in mind for FSK is that it previously had waived a meaningful portion of its management fees in order to help create value for shareholders. However, beginning this year, the manager will be reinstating its full incentive fee. While this is not a deal-breaker and should not come even close to threatening the base quarterly dividend, it will undoubtedly lead to lower special/extra dividends. Both businesses have had pretty good underwriting performance of late. ORCC's non-accrual rate is currently 1.0% of total portfolio at cost, whereas FSK's non-accruals totaled 4.9% at cost. While ORCC's non-accrual rate is vastly superior to FSK's, it is important to point out that none of FSK's non-accruals are from loans underwritten since the new FS/KKR advisor took over in April 2018. As its legacy loans roll off its balance sheet, FSK's non-accrual rate is declining and should continue to improve moving forward. When it comes to investment portfolio construction, FSK has 45% exposure to first lien senior secured loans, whereas ORCC has 72% exposure to first lien senior secured loans. FSK has 18% exposure to second lien senior secured loans and ORCC has 14% exposure to second lien senior secured loans. 73% of FSK's investments are in floating interest rate debt, while 86% of ORCC's investments are in floating interest rate debt. FSK's sector exposure favors more defensive business models, including 23% exposure to software and 10% exposure to healthcare as its top two industries. Meanwhile, ORCC's largest sector exposure is 13% to software, 10% to financial services, 9% to insurance, and 7% to food and beverage businesses. Overall, ORCC's investment portfolio looks to be much better suited to the current environment with its greater emphasis on conservatively positioned and floating interest rate loans, better underwriting track record, and equal to superior exposure to defensively positioned industries. FS KKR Vs. Owl Rock - Dividend Outlook In their latest earnings calls, both management teams have emphasized how rising interest rates have enabled them to grow earnings and dividends in the current environment. For example, FSK's management announced: The recent increases in interest rates have positively impacted our net investment income. And as Brian mentioned, we are well positioned to continue to benefit from the Fed's most recent action as 89% of our debt investments or floating rate. From a starting point of September 30, a 100-basis point move and higher and short-term rates ultimately will increase our net investment income by approximately $0.25 per share per year, which equates to approximately $0.06 per share per quarter.Seeking Alpha • Nov 15
FS KKR Capital: Middle Market Trends Will Fuel Its NII
Summary The company reported an adjusted NII of $0.73 per share, a 9% increase Q-o-Q and a 14% increase Y-o-Y. Based on the management’s calculations if the 50 basis point interest rate hike happens in December, the NII will grow by approximately $0.075 for the fourth quarter. According to the latest survey among middle market business owners, 62% expect an increase in business revenue within the next 6 months. FSK is yielding 13.11%. Investment thesis The last time I covered FS KKR Capital Corp (FSK) in January 2022, I rated the company as a Hold. Since then a lot of things happened, the interest rates skyrocketed and the dividend yield is almost 2% higher than during my last article. The company could be an ideal investment for income investors who do not mind the variable dividend. FSK reported great NII figures and due to the general interest rates, the fourth quarter results will likely be at least as good as the third. However, due to interest rate increases, the NAV is on the decline and I expect it to decline in the first half of 2023 as well. Third quarter results FSK is the 2nd largest BDC among the 48 publicly traded BDCs. The company reported solid third-quarter results. Adjusted net income per share increased significantly on both Y-o-Y and Q-o-Q basis. The company reported an adjusted NII of $0.73 per share, a 9% increase Q-o-Q and a 14% increase Y-o-Y. The strong NII growth was due to the rapid rise of interest rates. For the fourth quarter, I also expect great NII numbers because according to the management a 100-basis point move will increase the company's net investment income by approximately $0.06 per share. In the fourth quarter, we already experienced a 75 basis point hike and another 50 basis point increase is on the table. Based on the management's calculations if the 50 basis point hike happens the NII will grow by approximately $0.075 for the fourth quarter. The strong growth in earnings also resulted in the increase of the supplemental distribution by $0.01. In terms of the NAV, the net asset value per share was reduced by the $0.67 per share dividend paid during the quarter and increased by $0.01 per share due to share repurchases. However, investors should note that the company's NAV has been on the decline since the third quarter of 2021. The debt-to-equity ratio slightly increased in the third quarter of 2022 but the 1.19x is still a healthy level. The biggest challenge of FSK for the upcoming months is the new loan originations and investments. Due to the interest rate increases, it is harder to find new investments, investment activity is on the decline. I believe it is going to stay at these low levels until interest rates stop climbing. In addition, as long as the inflation remains high and interest rates stay on elevated levels the asset valuations will be under pressure causing the NAV to further decline. U.S. Middle Market in 2023 There are some major trends that investors should keep an eye on for 2023 in the middle market space. FSK invests in companies that have revenues between $10 million and $2.5 billion. Investors might think that inflation was a big issue in the second half of 2022 for middle-market companies. The vast majority of these companies passed along the price increases to their customers in the third quarter and that is why they reported great revenue figures. I believe this trend is likely to continue in the first half of 2023 when inflation will remain elevated. The middle market remained on a path for growth in the third quarter, even as the market grappled with elevated inflation. The largest challenge they have to face is the tight labor market. Employee compensation rose to record highs and this grew the expenses of the middle market companies. However, as long as they can pass along the increased expenses to their consumers no major problem will unfold. While the first nine months of 2022 were mainly about caution due to high-interest rates which reduced M&A activity and future investments I believe 2023 will be different. The middle market companies will resume their business investments and M&A activity will pick up. This will result in more loan origination from BDCs especially with the fed's slowing down interest rate increases due to the ease of inflation pressure. According to the latest survey among middle market business owners, 60% reported that their business revenue increased over the past six months, and 62% expect it to increase within the next 6 months as well. rsmus.com In addition, the middle market companies will be ramping up their ESG initiatives in 2023. Consumer behavior is changing and nearly half of the consumers said they would like to know what a company's ESG results are, what are the plans for a sustainable future and 54% of consumers said they would like sustainability information on labeling. Due to this consumer behavioral change companies are focusing on specific concepts now rather than broad goals. Valuation The company is trading below its book value by 23%. Its P/NAV is 0.77x which is close to its 1-year average of approximately 0.79x However, looking at the BDC sector and its 5 largest companies FSK is the best valued at the moment. Data by YCharts The same can be said about its earnings multiple. It is high compared to its average but low compared to its peers. Compared to its previous figures FSK's current P/E ratio is approximately 30% higher than its 5-year average. Part of the reason is the elevated earnings due to the rapid rise of interest rates which was not the case in the last 5 years. If we want to support our valuation thesis it is worth looking at the dividend yield because a lot of investors are in BDCs due to the high yield. FSK's current 13.11% dividend yield is among the highest since it started paying dividends in 2014 so income investors might want to get some exposure to FSK based on its yield. Data by YCharts Dividend policy FSK has a variable dividend structure, which can be an attractive dividend structure from a management's point of view because they can match the distribution to the company's earnings stream. Due to the variable dividend structure, the management has paid out a fairly high dividend in 2022 because of its NII growth. I expect this elevated payment to continue until the second half of 2023 because of further interest rate increases. The company also plans to fulfill its share buyback program of $100 million by the end of the year. "…share repurchases, we've had this $100 million plan, and we intend to fill that plan. And I think we've been kind of clear with that sort of -- and we've done that with probably the other $500-odd million of shares we have repurchased over the last handful of years and you should expect that in the coming quarters" - Daniel Pietrzak - Co-President & CIO.Seeking Alpha • Nov 04
FS KKR Capital Q3 2022 Earnings Preview
FS KKR Capital (NYSE:FSK) is scheduled to announce Q3 earnings results on Monday, November 7th, after market close. The consensus EPS Estimate is $0.73 (+14.1% Y/Y) and the consensus Revenue Estimate is $404.17M (+12.3% Y/Y). Over the last 2 years, FSK has beaten EPS estimates 88% of the time and has beaten revenue estimates 75% of the time. Over the last 3 months, EPS estimates have seen 7 upward revisions and 0 downward. Revenue estimates have seen 7 upward revisions and 0 downward.Seeking Alpha • Oct 21
FS KKR: 14.9% Yield, 32% Discount, Undervalued, Benefits From Rising Rates
Summary FSK is selling at much lower P/NAV and P/NII valuations than what's typically found in the BDC industry. It yields 14.89%, with good NII/Dividend coverage of 1.12 to 1.13X. 87% of its debt investments are floating rate, which gives FSK an edge in the current rising rate environment. We initially added FS KKR Capital Corp. II (FSKR) to the HDS+ portfolio back in late April 2021, as an undervalued play on its upcoming merger with sister BDC FS KKR Capital Corp. (FSK) in Q2 2021. The merger was completed in mid-June '21, with the new entity trading under the FSK ticker. It has delivered a 7.27% total return, with its ample distributions making up for negative price gains. That compares well with the S&P's -9.3% return during this period. Hidden Dividend Stocks Plus Company Profile: FSK is a Business Development Corp., a BDC, that merged FS KKR Capital Corp. II with sister BDC FS KKR Capital Corp. in Q2 '21, which gave it a much stronger platform. The merged company holds the No. 2 spot in the BDC industry, with a $5.2B market cap, behind Ares Capital (ARCC), and ahead of Owl Rock Capital (ORCC), FSK has a $16.2B portfolio, of which 70% was invested in 1st and 2nd Lien senior secured securities, as of 6/30/22. 87% of its debt investments are floating rate, which gives FSK an edge in the current rising rate environment. "During the third quarter, we expect to benefit from the rising interest rate environment by approximately $0.04 per share as existing portfolio company interest rate contracts began resetting at higher levels. For planning purposes, our high-level view is that every 100 basis point move in short-term rates could increase our annual net investment income by up to $0.26 per share, which equates to ~$0.06 per share per quarter." (Q2 '22 Call) FSK also holds ~13% in asset-based finance investments, 2.6% in equity holdings, and 9.3% in a JV, Credit Opportunities Partners. The median portfolio company has $81M in annual EBITDA, with 6.1X leverage. FKR site FKR is diversified across many sectors, with holdings in 192 companies. Exposure to its top 10 largest portfolio companies by fair value was 18% as of June 30, 2022, vs. 19% as of March 31, 2022. FKR site FSK's JV, Credit Opportunities Partners LLC, is a partnership with the South Carolina Retirement Systems Group Trust - SCRS, with Equity ownership of 87.5%, for which FSK provides day-to-day administrative oversight. The Fair value of the JV's investments was $3.6B, as of 6/30/22, with 93% in floating rate investments, and ~78% in Senior Secured Loans. FSK had $1.4B in equity in the JV. The Net Debt/Equity ratio was 1.09X, as of 6/30/22: FSK site Ratings: As of June 30, 2022, investments on non-accrual status represented 2.9% and 4.9% of the total investment portfolio at fair value and amortized cost, respectively, vs. 1.5% and 3.2% as of March 31, 2022. Management placed two small debt investments with a combined fair market value of $11.4M on non-accrual, and removed one small investment with a fair market value of $15.5M from non-accrual status. Earnings: FSK had a strong second quarter. Total Investment Income surged to $379M, up 84% vs. Q2 '21, while NII rose 75%, to $203M from $116M in Q2 '21. Net Realized Gains rose to $191M, vs. $51M 1 year earlier, while Net Unrealized Gains were -$464M, vs. $698M in Q2 '21. "Consistent with the overall private debt market, the value of our investment portfolio declined marginally during the quarter due primarily to spread widening and market multiple contraction. The 1.6% decline in the value of our investment portfolio equated to a 3.4% decline in our net asset value quarter-over-quarter." (Q2 '22 earnings call) Growth has been exponential so far in 2022, with total and net investment income up by over 3 digit %'s. However, FSK also had 107% share count growth, due to the merger with FSKR in 2021, so NII/Share only rose 5.7% in Q1-2 '22, vs. Q1-2 '21. Hidden Dividend Stocks Plus Looking forward to Q3 2022, NII earnings/share should be up vs. Q2 '22's $.71/share: "We expect third quarter 2022 GAAP net investment income to approximate $0.76 per share, and we expect our adjusted net investment income to approximate $0.72 per share." (Q2 '22 earnings call) New Business: In Q2 '22, management originated $804M in investments, which were predominantly add-on financings for existing portfolio companies. It had $906M in Sales and Redemptions, bringing its net investment activity to -$102M. Net Sales to the JV were $87M, bringing adjusted net investment activity to -$15M. FSK site Dividends: FSK pays variable distributions - its most recent distribution was $.61, plus a supplemental distribution of $0.06/share, for a total of $.67/share. At its 10/19/22 midday price of $18.00, FSK yields 14.89%. It should go ex-dividend next on ~12/14/22, with a ~1/4/23 pay date. Hidden Dividend Stocks Plus FSK's NII/Distribution coverage in Q1-2 '22 was strong, improving slightly to 1.13X, while Adjusted NII coverage was 1.06X. FSK's NII/Distribution coverage was solid in 2021, at 1.12X. Adjusted NII coverage was a bit lower, at 1.08X, but still good for the BDC industry, where some BDC's experience sub-1X coverage. Hidden Dividend Stocks Plus FSK also has a $100M share repurchase program. Through August 6, 2022, they repurchased ~$41M of shares under this program. Profitability and Leverage: FSK's ROA and ROE have both more than doubled over the past 12 months, and both metrics are also higher than BDC averages. Its EBIT Margin has slipped a bit, but remains higher than average. On the leverage side, its Debt/NAV is up, to 1.24X, about average for its industry. Hidden Dividend Stocks Plus Debt and Liquidity: FSK had a 3.51% weighted average effective rate on its borrowings as of June 30, 2022. Its debt is rated Rated Investment Grade by Moody’s (Baa3) Stable, Fitch (BBB-) Stable & Kroll (BBB) Stable. Management amended and upsized FSK's Senior Secured Revolver in Q2 '22, to increase the total commitment by $455M to $4,655M, and extend the maturity from 2025 to 2027.Seeking Alpha • Oct 09
Better Buy: Owl Rock's 11.8% Yield Or FS KKR's 14.4%
Summary Both Owl Rock Capital and FS KKR Capital boast investment grade credit ratings. Owl Rock Capital has better current underwriting performance, whereas FSK pays out a higher dividend yield. Which one is the better buy? Both Owl Rock Capital (ORCC) and FS KKR Capital (FSK) are high yield business development companies (i.e., BDCs) (BIZD) that boast investment-grade credit ratings. In this article, we will compare them side by side and offer our take on which one is a better buy. Owl Rock Capital Vs. FS KKR Capital - Balance Sheet As was already stated, both boast investment grade credit ratings of Baa3 (Stable) or equivalent. ORCC boasts considerable liquidity of $1.7 billion (~15.4% of its total enterprise value) that accompanies its leverage ratio of 1.2x to give it a solid balance sheet. Meanwhile, ~50% of ORCC's liabilities have floating interest rates, giving it moderate exposure to rising interest rates that it more than offsets through its investment portfolio (more on that in a little bit) Meanwhile, FSK has a slightly lower leverage ratio of 1.15x, with liquidity of $2.7 billion (~19.1% of its total enterprise value). FSK has just under 50% exposure to floating interest rates, also giving it moderate exposure to rising interest rates that it more than offsets through its investment portfolio. While both appear to be in solid shape, we give FSK the slight edge here given that its liquidity is superior to ORCC's on an absolute and relative basis, it has slightly less leverage, and slightly less of its debt is floating interest rate. Owl Rock Capital Vs. FS KKR Capital - Investment Portfolio ORCC's investment portfolio is quite conservatively positioned, with 88% of it being invested in senior secured debt. Furthermore, it is very favorably exposed to rising interest rates, with 99% of its debt invested in floating interest rate securities, meaning that ~90% of its overall investment portfolio is positively exposed to rising interest rates. When compared to its slightly under 50% debt exposure to floating interest rates, ORCC is very well positioned to benefit from rising interest rates. Management emphasized this on its Q2 earnings call, stating: we will see a meaningful benefit from rising rates starting in the third quarter. As you will recall, at the beginning of the second quarter, many of our borrowers reset their interest rate election to three months LIBOR, which was approximately 1% at the time and slightly above the average floor in our portfolio. So there was a limited benefit to our interest income in Q2. The second quarter ended with three months LIBOR at 2.3% which meaningfully increase the base rate for those borrowers. Holding all else equal had our base rates as of June 30, has been in effect for the entirety of the second quarter, we estimate NII would have increased $0.02 per share, to a total of $0.34 per share in Q2. Additionally, borrowers will continue to reset their interest rate elections throughout the third quarter which will continue to benefit the yield on our portfolio and be accretive to NII. On top of that, ORCC's underwriting performance has been stellar thus far, with only 0.1% of its investments at fair value currently on non-accrual. This bodes well for its ability to weather an economic downturn, which appears increasingly likely. Meanwhile, FSK has 93% of its portfolio invested in senior secured debt or asset-based finance investments and 87% of its debt investments in securities with floating interest rates. While this is not as good as ORCC's, it is still pretty strong relative to its less than 50% debt exposure to floating interest rates. Management elaborated on how rising interest rates benefit their cash flow statement on their Q2 earnings call, stating: During the third quarter, we expect to benefit from the rising interest rate environment by approximately $0.04 per share as existing portfolio company interest rate contracts began resetting at higher levels. And while there is a detailed breakout of how every 100 basis points of interest rate increases is expected to positively impact our investment income provided in our 10-Q. For planning purposes, our high-level view is that every 100 basis point move in short-term rates could increase our annual net investment income by up to $0.26 per share, which equates to approximately $0.06 per share per quarter. FSK's underwriting performance continues to be decent, but is lagging considerably behind ORCC's, with non-accruals at fair value of 2.9%. That said, we expect this number to improve moving forward - barring a meaningful economic downturn - given that KKR originated loans are becoming an increasingly large percentage of the total investment portfolio and the non-accrual rate among those loans is only 0.5% of fair value. Overall, we give the edge to ORCC here as its non-accruals are considerably lower than FSK's and its exposure to rising interest rates is also considerably more favorable. Owl Rock Capital Vs. FS KKR Capital - Dividend Safety ORCC's dividend is currently barely covered by net investment income, as its second quarter net investment income was $0.32 compared to its $0.31 dividend payout. Management believes this tight coverage is likely just a short-term issue due to receiving very little repayment income thanks to the fact that the M&A environment is seasonally quieter. Furthermore, its income is likely going to rise in Q3 due to rising interest rates.Seeking Alpha • Sep 18
FS KKR: A Hawkish Fed Is A Tailwind For Its Robust Dividend Yields
Summary FS KKR has transformed its underperforming assets into higher-quality income-producing ones. Therefore, it has helped deliver a high level of visibility for its investment income. FSK has outperformed the broader market in 2022, as its valuation was not excessive. Coupled with solid dividend yields forming a stable net investment income, buying sentiments should remain robust. A falling NAV per share growth could hamper FSK's upward momentum, as market volatility could cause further value compression in its portfolio companies. We discuss why we rate FSK as a Buy, despite the near-term headwinds. Thesis Leading business development company FS KKR Capital Corp.'s (FSK) stock has outperformed the broader market in 2022, as it posted a YTD total return of 7.92%. Its robust dividend yields have continued to support its valuation, even though its stock has been consolidating since June 2021. We deduce that the market has not battered FSK over the past year as it was not overvalued to begin with. Moreover, its underperformance over the past five years "insulated" FSK from further hammering as management continues its business transformation toward higher quality income-producing assets. Despite that, FS KKR's NAV per share is expected to face near-term headwinds, which could hinder its upward momentum in breaking out of its consolidation range. However, the company has also been benefiting from a hawkish Fed, as its interest income has increased markedly, helping to mitigate its NAV impact. Hence, we are confident that the company's capital structure and higher-quality, more defensive portfolio visibility should continue to provide confidence in underpinning buying sentiments at the current levels. Therefore, we rate FSK as a Buy, given its interest rate tailwinds and a well-balanced valuation. Interest Rate Tailwinds Drove Massive Growth FSK interest income share of total investment income % (Company filings) The company's portfolio remains defensively configured, with first lien debt accounting for 61.9% of its portfolio fair value. Accordingly, interest income accounted for nearly 76% of its total investment income in Q2, providing a high level of visibility from the company's income-producing assets. FSK total interest income change % (Company filings) As a result, interest income has continued to drive significant investment income growth for the company. As seen above, FS KKR posted an uptick of 123% in interest income growth in Q2, down from Q1's 179% increase. Its portfolio is configured to leverage a hawkish Fed, as 87.4% of its portfolio is based on floating rate debt. Management also highlighted it expects interest income to continue supporting its net investment income ((NII)) growth in Q3, as existing contracts are repriced with higher rates. CFO Steven Lilly accentuated: During the third quarter, we expect to benefit from the rising interest rate environment by approximately $0.04 per share as existing portfolio company interest rate contracts began resetting at higher levels. Our high-level view is that every 100 basis point move in short-term rates could increase our annual net investment income by up to $0.26 per share, which equates to approximately $0.06 per share per quarter. (FS KKR FQ2'22 earnings call) But, It's Prudent To Expect Some Normalization Given the recent above-consensus CPI print, the market has priced in an 82% probability (as of September 16) of a 75 bps hike in the upcoming FOMC meeting. Even a 100 bps hike has not been ruled out, with an 18% probability attached. Therefore, the near-term momentum should continue to benefit FS KKR. However, we think it would be unreasonable for investors to expect FS KKR to manage its distribution policy in accordance with the accretion to its NII due to the Fed's rate hikes. We believe it's essential for investors to expect FS KKR to manage its dividend strategy with the Fed's expected neutral rate and not what its terminal rate would likely be in 2023/24. That would help provide more stability in its distribution. Also, investors should not keep expecting "unusually large" rate hikes moving forward, as inflation rates have already shown signs of moderating. Coupled with signs of recession, we believe the growth cadence of the rate hikes should moderate moving forward. FSK NII per share change % consensus estimates (S&P Cap IQ) Therefore, we believe the consensus estimates (bullish) are reasonable, suggesting its NII per share growth should moderate through FY23. We don't think it would impact its distribution, given its high level of NII visibility. However, we believe investors need to temper their expectations of elevated NII per share growth rates moving ahead. FS KKR's Dividends Look Secured FSK NII per share and Dividend per share consensus estimates (S&P Cap IQ) Hence, we are confident that its distribution is well covered by its forward NII per share, as seen above. Therefore, it should continue to support buying sentiments even though it has been moving within a tight consolidation zone, as it's beneficial from a total return framework. FSK NTM Dividend yield % consensus estimates (S&P Cap IQ) With an NTM dividend yield of 12.9%, it's easy to envisage why FSK has outperformed the market, despite not being able to break above its June 2021 highs. Hence, its robust distribution predicated on a defensive portfolio has helped instill investors' confidence in its portfolio outlook. Is FSK Stock A Buy, Sell, Or Hold? FSK NAV per share change % consensus estimates (S&P Cap IQ) However, investors need to consider the growth in FS KKR's NAV per share has moderated markedly from 2021, given the current market volatility. We believe value compression could continue to be a near-term headwind for its portfolio companies, impacting its NAV per share. As a result, it could also affect the re-rating potential of FSK until the price discovery in the market stabilizes. Also, FS KKR's investment activity slowed markedly in Q2, as its originations fell to $804M, down from Q1's $2.07B.Seeking Alpha • Aug 16
FS KKR: How This 10.8% Yielding BDC Is Looking After Q2 Earnings
FSK is up roughly 24% since its June lows and is now in positive territory for 2022. After FSK's bounce, it's still trading at an attractive valuation compared to its peers. After the Q3 dividend is paid, FSK will have paid just over 80% in the first 3 quarters of 2022 compared to its 2021 total dividend payments. FS KKR Capital Corp (FSK) has significantly bounced off its June lows by roughly 24% and is up 6% in 2022. I have been paying close attention to FSK as this is one of the largest Business Development Companies (BDCs) and an interesting income investment. FSK just reported Q2 earnings and generated a top and bottom line beat while rewarding investors with a special dividend on top of the regular quarterly dividend. BDCs are required to invest at least 70% of their assets in private or public U.S. firms with market caps under $250 million and distribute 90% of their taxable income to shareholders as ordinary dividends annually, making them a sought-after component within income investing. FSK just declared a $0.67 dividend payable on 10/4/22 with an ex-dividend date of 9/13/22. As some time has passed since my first article on FSK, I wanted to take another look to see what has changed and how FSK is being valued compared to its peers. Seeking Alpha FSK's valuation compared to other BDCs. FSK is the second largest BDC by market cap behind Ares Capital (ARCC). Currently, there are 12 BDCs that exceed $1 billion in market cap and 14 that exceed $1 billion in net assets. What may surprise some readers is that FSK is not only the 2nd largest by market cap but also net assets, yet FSK is hardly one of the more popular BDCs. When I think about BDCs, ARCC, Main Street Capital (MAIN), and Gladstone Investment (GAIN) are the first ones that come to mind. Since July 1st there have been 6 articles on MAIN, 3 articles on GAIN, and 7 articles on ARCC published on Seeking Alpha, while FSK has had 2 articles written about it. FSK may not be as popular as other BDCs, but it is the 2nd largest and I want to see how it compares to its peers across several specific metrics used to valuate BDCs. In addition to reading the 10-Qs and 10-Ks, and looking over individual financials, I have built a table that gets updated quarterly to compare BDCs. I specifically look at the NII to market cap multiple, price to NAV discount, and the dividend yield. NII is a better metric than EPS to utilize for a BDC, so the NII to market cap is a more effective measure than a P/E ratio. This is why I utilize this metric to see how cheap BDCs are trading against their NII. I also like to see if there is a steep discount or a heavy premium with a BDCs price to NAV valuation, in addition to looking at the yield and dividend coverage. Steven Fiorillo, Seeking Alpha I have selected the following companies as FSK's peer group: Ares Capital MidCap Financial Investment Corporation (MFIC) formally Apollo Investment ((AINV)) Goldman Sachs BDC (GSBD) Prospect Capital Corp. (PSEC) Owl Rock Capital Corp. (ORCC) Barings BDC (BBDC) Golub Capital BDC (GBDC) Sixth Street Specialty Lending (TSLX) Gladstone Capital (GLAD) Main Street Capital The Peer group averages are a 15.17x NII to market cap multiple, an 8.93% premium to NAV, and an 8.73% dividend Yield So how does FSK stack up? FSK has the 4th lowest NII to market cap multiple at 10.54x within its peer group. BBDC's NII fell off a cliff in Q2, coming in at $21.9 million over the TTM compared to $77.7 million in the TTM at the end of Q1 2022, pushing its ratio to 52.75x. If I exclude BBDC, the peer group average drops to 10.38x, placing FSK slightly above the peer group average. Steven Fiorillo, Seeking Alpha I am cheap, and when it comes to investing want to pay the lowest, I can for assets. I am not opposed to paying a premium for good companies, but if I can get a good company at a discount, that's even better. Therefore, I look at the discount to NAV when it comes to BDCs. If possible, I want to pay as close to the NAV or even at a discount to NAV. I am willing to pay a premium for ARCC because I personally place ARCC as an upper-tier BDC. FSK trades at a -15.07% discount to NAV which is interesting, especially after its recent bounce off the lows. GLAD and MAIN trade at large premiums, which has pushed the group's average to an 8.93% premium to NAV. Steven Fiorillo, Seeking Alpha BDCs, in my opinion, are ultimately income investments. If someone was chasing capital appreciation as their first investment criteria, I don't think BDCs would be at the top of their list. I want to get BDCs at the best valuation I can, and if I can get a larger yield at a great valuation, it's a win-win. The average yield throughout the peer group is 8.73%, and FSK is currently yielding 10.88%. Steven Fiorillo, Seeking Alpha Overall, FSK still looks attractive even though shares have appreciated by roughly 26% this summer. At the current prices, you're paying a lower-than-average multiple on FSK's NII, and a -15.7% discount to its NAV. Based on these metrics alone, FSK looks like a buy, then when you add in the 10.88% yield, FSK looks very enticing. Looking at what FSK did in Q2 and what the future may have in store for it In Q2 2022, FSK's NII was $0.71 per share, and its adjusted NII was $0.67, which was a $0.01 beat, while its total investment income was $379 million, beating the streets estimates by $6.29 million. The total fair value of investments was $16.2 billion, of which 71% was invested in senior secured securities. FSK's weighted average annual yield on accruing debt investments increased to 9.9% from 8.9% since the end of Q1, and its weighted average annual yield on all debt investments was 9.3%, compared to 8.6%. FSK continued its diversification as its exposure to the ten largest portfolio companies declined to 18% compared to 19% at the end of Q1.Seeking Alpha • Aug 07
FS KKR Capital Q2 2022 Earnings Preview
FS KKR Capital (NYSE:FSK) is scheduled to announce Q2 earnings results on Monday, August 8th, after market close. The consensus EPS Estimate is $0.66 (-10.8% Y/Y) and the consensus Revenue Estimate is $372.83M (+81.0% Y/Y). Over the last 2 years, FSK has beaten EPS estimates 88% of the time and has beaten revenue estimates 63% of the time. Over the last 3 months, EPS estimates have seen 3 upward revisions and 1 downward. Revenue estimates have seen 6 upward revisions and 0 downward.Seeking Alpha • Jul 19
Better Investment Grade Sky-High Yield Buy: FS KKR Vs. Main Street
Both FSK and MAIN boast investment-grade credit ratings. FSK has a 12.6% dividend yield, and MAIN has a 6.2% dividend yield. Which one is the better buy? Both FS KKR (FSK) and Main Street Capital (MAIN) have investment grade (BBB- Stable from S&P) credit ratings, vaulting them into the upper echelon of quality Business Development Companies (i.e., BDCs) (BIZD). Both also happen to offer mouthwatering dividend yields, with FSK boasting a mouthwatering 12.6% dividend yield and MAIN offering a juicy 6.2% dividend yield. In this article, we will compare them side by side and offer our take on which one is a better buy. Balance Sheet As was already stated, both FSK and MAIN have the same investment grade credit rating and outlook (FSK has a Baa3 rating with a Stable outlook from Moody's and MAIN has a BBB- rating with a Stable outlook from S&P), which puts them on similar footing in terms of perceived risk and access to capital. FSK has $2.6 billion in total liquidity (~17% of its enterprise value) with a leverage ratio of 1.12x. 47.4% of FSK's total outstanding debt is floating rate as of the end of Q1. MAIN, meanwhile, has $535 million in total liquidity (~11.2% of its enterprise value) and a leverage ratio of under 1x. 18.5% of its total outstanding debt is floating rate as of the end of Q1. While both appear to be in solid shape and FSK's liquidity position seems stronger, MAIN seems to have the stronger balance sheet overall with lower leverage and much less floating interest rate exposure. Investment Portfolio FSK's portfolio consists of 69% senior secured debt and 87% of its debt investments are floating rate, meaning that nearly 80% of the total investment portfolio benefits from rising interest rates. Furthermore, FSK's portfolio is generally overweight more defensive sectors, with its top five sectors being software, capital goods, healthcare, commercial and professional services, and real estate. Non-accruals were very low as of 3/31/22 at just 1.5% at fair value. MAIN's portfolio consists of 69% senior secured debt and 73% of its debt investments are floating rate, meaning that 58.6% of the total investment portfolio benefits from rising interest rates. Furthermore, MAIN's portfolio is generally overweight more defensive sectors, with its top five sectors being commercial and professional services, machinery, capital goods, software, and distributors. Non-accruals were very low as of 3/31/22 at just 0.6% at fair value. Both portfolios have their strengths. FSK's is larger and therefore better diversified, has significantly more exposure to debt investments, and is better positioned to see income increase from rising interest rates. Meanwhile, MAIN has a lower non-accrual rate (though it is not quite as good as it first appears given that it has less exposure to debt, which is the only investment class that can go on non-accrual status) and potentially better growth potential given its greater exposure to equity. It is also worth noting that MAIN has outperformed FSK over the years: Data by YCharts While it is extremely close, we are going to give a slight edge to FSK here, though we also recognize that MAIN has a tremendous track record. However, given that we have a separate section for that, we will just stick with objective evaluation of the numbers here. Given that FSK has much greater exposure to floating rate interest rates, is better diversified, and has greater exposure to debt relative than equity, we favor FSK's portfolio in the current climate. Dividend This section is not entirely relevant to the comparison as FSK implements a varying dividend policy by paying out nearly all of its earnings each quarter, whereas MAIN pursues a progressive monthly dividend policy where it supports its base dividend and tries to grow it over time. As a result, we are simply going to say here that we think that FSK's total recent dividend payout of 12.6% more than doubles MAIN's 6.2% payout and therefore believe that FSK's margin of safety for paying out a higher yield than MAIN does over the course of a fiscal year is sufficiently large to give it a more attractive overall dividend. Track Record As we already discussed in a previous section, MAIN's track record is convincingly superior to FSK's. However, there are some caveats to that superior performance. For example, this outperformance was largely facilitated by an expanding P/B ratio for MAIN and a shrinking P/B ratio for FSK as well as a major equity bull market, which provided outsized benefits to MAIN: Data by YChartsSeeking Alpha • Jun 10
FS KKR Capital Is An Undervalued BDC Yielding 12.49%
FSK continues to grow its Net Investment Income and quarterly distribution indicating that its overall distribution per share can still grow. FSK is trading at almost a -20% discount to its NAV indicating a steep discounted share price while yielding 12.49%. Compared to its peers, FSK looks undervalued while having the largest distribution yield, making it a compelling investment in the BDC space.Seeking Alpha • Apr 03
FS KKR Capital: 15% Discount To NAV, Very Low Earnings Multiple, 11% Yield
FSK is selling at a Price/NII of just 8.33X, a 45% discount vs. the BDC industry average. It's also selling at a 15% discount to its 12/31/21 NAV/Share of $27.17. FSK has a 10.92% yield, vs. 8.21% for the BDC industry.Seeking Alpha • Jan 21
FS KKR Capital: The Payout Ratio Is Still Overstretched
The company’s dividend yield is 11.13% but the sustainability is still questionable. FSK is undervalued trading 0.84x its NAV but not undervalued enough just yet compared to the risks. FSK's net asset value grew slowly in the last year but a significant part was due to the merger.Seeking Alpha • Aug 23
FS KKR: Attractive 12% Yield On Offer At A Bargain Price
FS KKR delivers some solid financial results, outperforming across the top and bottom lines at its first post-merger quarter. The recent Home Partners of America sale could unlock additional earnings potential, further boosting earnings down the line. With shares still at a wide discount to NAV despite offering an increasingly attractive capital return, I see upside ahead.Shareholder Returns
| FSK | US Capital Markets | US Market | |
|---|---|---|---|
| 7D | 3.3% | 1.9% | 0.2% |
| 1Y | -50.5% | 5.9% | 19.6% |
Return vs Industry: FSK underperformed the US Capital Markets industry which returned 2.5% over the past year.
Return vs Market: FSK underperformed the US Market which returned 19.4% over the past year.
Price Volatility
| FSK volatility | |
|---|---|
| FSK Average Weekly Movement | 4.4% |
| Capital Markets Industry Average Movement | 3.9% |
| Market Average Movement | 7.2% |
| 10% most volatile stocks in US Market | 16.6% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: FSK has not had significant price volatility in the past 3 months compared to the US market.
Volatility Over Time: FSK's weekly volatility (4%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2007 | n/a | Michael Forman | www.fskkrcapitalcorp.com |
FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies.
FS KKR Capital Corp. Fundamentals Summary
| FSK fundamental statistics | |
|---|---|
| Market cap | US$3.03b |
| Earnings (TTM) | -US$550.00m |
| Revenue (TTM) | US$1.42b |
2.1x
P/S Ratio-5.5x
P/E RatioIs FSK overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| FSK income statement (TTM) | |
|---|---|
| Revenue | US$1.42b |
| Cost of Revenue | US$0 |
| Gross Profit | US$1.42b |
| Other Expenses | US$1.97b |
| Earnings | -US$550.00m |
Last Reported Earnings
Mar 31, 2026
Next Earnings Date
Aug 06, 2026
| Earnings per share (EPS) | -1.96 |
| Gross Margin | 100.00% |
| Net Profit Margin | -38.65% |
| Debt/Equity Ratio | 137.9% |
How did FSK perform over the long term?
See historical performance and comparisonDividends
17.0%
Current Dividend Yield-121%
Payout RatioCompany Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2026/07/14 15:13 |
| End of Day Share Price | 2026/07/14 00:00 |
| Earnings | 2026/03/31 |
| Annual Earnings | 2025/12/31 |
Data Sources
The data used in our company analysis is from S&P Global Market Intelligence LLC. The following data is used in our analysis model to generate this report. Data is normalised which can introduce a delay from the source being available.
| Package | Data | Timeframe | Example US Source * |
|---|---|---|---|
| Company Financials | 10 years |
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| Analyst Consensus Estimates | +3 years |
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| Market Prices | 30 years |
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| Ownership | 10 years |
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| Management | 10 years |
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| Key Developments | 10 years |
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* Example for US securities, for non-US equivalent regulatory forms and sources are used.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more.
Analysis Model and Snowflake
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Industry and Sector Metrics
Our industry and section metrics are calculated every 6 hours by Simply Wall St, details of our process are available on Github.
Analyst Sources
FS KKR Capital Corp. is covered by 21 analysts. 11 of those analysts submitted the estimates of revenue or earnings used as inputs to our report. Analysts submissions are updated throughout the day.
| Analyst | Institution |
|---|---|
| Mark DeVries | Barclays |
| James Fotheringham | BMO Capital Markets Equity Research |
| Lana Chan | BMO Capital Markets Equity Research |