FS KKR Capital (FSK) Analysis | BDC Stock Breakdown

0:00Are your ad campaigns lighting up the dashboard? But not the pipeline. That's bullspend. And marketers are calling it out in... dashboard confessions. My boss asked for results, so I opened my dashboard for the only positive sounding metric I had. Impressions. Cut the bullspend. See revenue? Not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $25 credit at go to LinkedIn.com slash campaign turns the conditions apply. Welcome back to the BDC stock breakdown. The show where we examine business development companies look beyond the dividend yield and decide whether the stock deserves a place in an income portfolio. Today we're covering FSKKR, capital corporation trading under the ticker symbol FSK. FSKKR Capital is one of the largest publicly traded BDCs in the market.

1:03The company provides financing to private middle market businesses, primarily through senior secured loans. As of March 31st, 2026, FSK had investments in 236 portfolio companies across 23 industries with a total portfolio fair value of approximately $12.3 billion. About 64% of the portfolio was invested in senior secured securities. That gives FSK diversification across access to the KKR credit platform and the ability to participate in financing opportunities that may be unavailable to smaller BDCs. However, size does not automatically mean safety. In FSK's latest results, show why investors need to examine the details. Under the first quarter of 2026, FSK generated net investment income of 42 cents per share

2:07and adjusted net investment income of 41 cents per share. The company declared a second quarter distribution of 42 cents per share, meaning regular net investment income, covered the distribution exactly. While adjusted net investment income covered approximately 98% of it. At a share price of approximately $10.93, annualizing 42 cents quarterly distribution produces a potentially yield of roughly 15.4%. Assuming the payment remains at that level, that is an extremely high yield even by BDC standards. An investor should understand why the market is demanding such a large yield. FSK's net value fell from $20.89 per share at the end of 2025 to $18.83 at the end of March 2026.

3:13That was a decline of almost 10% in only one quarter. The company also reported approximately $2 per share in realized and unrealized investment losses. Here's a report. Try LinkedIn Hiring Pro. It's more than a job board. It's like the recruiter you always wished you had. Hiring Pro uses real-time insights to match your role to LinkedIn's unique network of professionals and delivers a short list of best-fit candidates. You'll spend less time sorting applicants and more time talking to the right people. Let's do it. You're a replaceable, Jane, but another you would be great. Hiring Right The First Time. Post your job for free on LinkedIn today at LinkedIn.com-slash-quality. Credit quality also weakened. Investments on non-accurral represented 4.2% of the portfolio at fair value, compared with 3.4% at the end of the previous quarter. On an amortized cost basis, non-accurral increased from 5.5% to 8.1%.

4:19A loan placed on non-accurral is generally no longer producing the expected interest income. So this is one of the most important numbers for investors to monitor. Leverage is another concern. FSK's net debt to equity ratio increased from 122% to 131% leverage, and can enhance shareholder returns when investment perform properly. But it can also magnify NAV losses when portfolio companies struggle. The positive side of the argument is valuation. At approximately $10.93 per share, compared to the last reported NAV of $18.83, FSK trades at a discount of roughly 42%. That means the market is valuing the company shares at only about $0.58 for every dollar of reported net assets. Management and KKR have taken several steps intended to support shareholder

5:26value. KKR completed a $150 million dollar tender offer, purchasing approximately $13.6 million FSK shares for $11 each. The offer was oversubscribed, suggesting that many shareholders were willing to exit near that price. FSK also authorised a separate $300 million share repurchase program. Buying shares substantially below NAV can increase NAV per remaining share, provided the company has enough capital and does not allow leverage to become excessive. KKR also invested $150 million in newly issued convertible preferred stock. Completing the transaction on June 29, 2026, in addition KKR agreed to waive its portion of the

6:30subordinated income. Sorry, I just can't think today. Subordinated income incentive fee for four quarters, which should provide some support for net investment income and the distribution. So what is my final assessment overall? So FSK offers a massive amount, sorry, a massive discount, a potentially very high income stream, broad portfolio diversification and direct financial support from KKR. Those are meaningful positives. However, the failing, the falling NAV, increasing non-accurals, higher leverage credit losses and reduced quarterly distribution show that this is not a low-risk bargain. The discount could create significant upside if management stabilizes the portfolio, but it could also remain wide if additional credit problems appear. For those reasons, I'm giving FSKKR capital corporation a rating of 5.5 out of 10. It's a

7:36pretty low rating, I know. FSK may be attractive as a smaller speculative income portion for investors who understand private credit risk. I would not personally treat it, though, as a core BDC holding until the company demonstrates that NAV erosion and non-accural growth are under control. The most important numbers to watch in future earnings reports will be net asset value, non-accurals, leverage, dividend coverage, and progress under the share repurchase program. But that concludes this edition of the BDC stock breakdown. Remember to like the video, subscribe to the channel and leave a comment with the next BDC you would like to see analyzed. Also, this video is for informational purposes only and should not be considered financial advice. I want to make that very clear. Overall, it's a very low rating and I know there may be some people, I don't know if there's a lot of fans or people even know what FSKKR actually is, but

8:40hopefully you guys found this report insightful. Another thing I just want to mention is I want to thank every subscriber who subscribed to this channel. You guys make this stuff happen. Anyway, thank you guys for time. I'll see you guys in the next. Brussels clean up nicely at Sweet Green. Maple glazed, roasted, and edges perfectly caramelized. Sweet Green's fall harvest is back on the menu, and the season's most overlooked little green vegetable is dressed to be devoured. You know what to do. Order on the Sweet Green app.