FS KKR Capital (FSK) Cuts Dividend 12.5% to $0.42

FS KKR Capital Corp. cut its quarterly dividend 12.5% to $0.42 per share from $0.48. The shares traded ex-dividend on June 17, 2026, which the company also designated as the record date for the distribution.

Why the dividend changed

The reduction followed FSK’s policy of aligning its quarterly distribution with per-share net investment income. Management said the $0.42 distribution matched GAAP net investment income of $0.42 per share for the quarter. Chief Executive Michael Forman also said investors should expect the distribution to fluctuate with net investment income rather than remain fixed from quarter to quarter. FSK’s first-quarter earnings-call transcript documents that policy.

The earnings decline was accompanied by deterioration in the investment portfolio. Net asset value fell to $18.83 per share from $20.89, and the company recorded a net realized and unrealized loss of $2.00 per share. Management attributed the decline to investments that had affected prior quarters, new non-accrual assets and market-driven spread widening in parts of the portfolio. Investments on non-accrual represented 4.2% of the portfolio at fair value and 8.1% at cost. The first-quarter results provide the operating and portfolio figures.

FSK paired the cut with a broader restructuring of its financial position. The measures included a preferred-stock investment by a KKR subsidiary, a KKR tender offer for common shares, a board-authorized repurchase program and an adviser incentive-fee waiver intended to support net investment income and the quarterly distribution. The company also said it would moderate new investment activity while concentrating on existing borrowers, leverage reduction and share repurchases. No split, merger or spinoff explains the dividend reduction. It was an earnings-linked change amid portfolio stress.

The subsequent quarter showed some stabilization without reversing the underlying need to monitor credit quality. FSK reported net investment income of $0.44 per share, reduced net leverage to its target range and said it had made progress lowering non-accrual assets. Net asset value nevertheless declined again, to $18.30 per share. The board subsequently set the next quarterly distribution at $0.44, consistent with management’s stated variable-distribution policy. FSK’s second-quarter SEC release describes that follow-through.

Dividend track record

The recent payment sequence shows a rapid reset rather than a stable progression. FSK paid $0.70 per share in each quarter of 2025. The amount then fell to $0.48 for the March 18, 2026 ex-dividend payment and to $0.42 for June 17, before recovering to $0.44 for the September 16 payment. The initial 12.5% cut therefore formed part of a wider reduction from the 2025 distribution level.

Annual cash totals tell a similarly uneven story. FSK paid $2.56 per share in 2020, followed by $2.47 in 2021, a decline of 3.5%. The total rose 7.7% to $2.66 in 2022 and 10.9% to $2.95 in 2023. It then fell 1.7% to $2.90 in 2024 and fell another 3.5% to $2.80 in 2025. Those totals included four payments in 2020 through 2022, seven in 2023, six in 2024 and four in 2025. The changing payment count matters because FSK has used base, supplemental and special distributions, as shown in the company’s dividend history.

The growth streak stood at 2 consecutive years before the latest reduction, while the last recorded annual cut year was 2023. Those measures can differ from aggregate calendar-year cash because supplemental and special payments change the total without necessarily changing the stated base rate in the same way. Over five years, the dividend record equates to 3.1% annual growth, but that longer-term figure masks the recent reductions and variability.

Is the dividend covered?

The earnings payout ratio is 7,000%, indicating that conventional reported earnings provide very little coverage for the stated annual dividend. For a business development company such as FSK, GAAP earnings can be heavily affected by realized and unrealized portfolio marks. Management therefore focuses on net investment income when setting the quarterly distribution. The $0.42 quarterly rate matched quarterly net investment income at the time of the cut, but that match leaves the payment directly exposed to future changes in portfolio income.

SmarterDividends assigns FSK a dividend safety score of 31 and rates the dividend D. The grade means unsafe in plain terms. It reflects the extreme earnings payout ratio, the reduction itself and an income stream tied to credit performance and quarterly investment income. The later $0.44 distribution shows that the policy can move upward as well as downward, but it does not convert the dividend into a fixed obligation.

Yield and valuation

FSK’s forward yield is 18.26%, far above the Asset Management industry median of 3.69% and the Financial Services sector median of 5.70%. That spread provides substantially more current income per dollar of share price, while also signaling the market’s concern about the durability of the distribution, portfolio values and credit performance. The shares have recorded a 25.2% loss over one year.

At a share price of $11.11, SmarterDividends estimates fair value at $23.24 and classifies FSK as undervalued, representing 106% upside to that estimate. The fair-value verdict is a valuation comparison, not a forecast. The gap partly reflects the market discount applied to FSK’s portfolio marks, leverage, recent losses and variable dividend policy.

How FS KKR Capital compares with peers

FSK’s 18.26% forward yield is more than the 3.69% industry median and exceeds every listed peer. BlackRock yields 2.16%, has 16 consecutive years of dividend growth, a 52% earnings payout ratio and an A safety grade. Blackstone yields 4.39%, has a 2-year growth streak, a 111% payout ratio and a C grade.

KKR & Co. yields 0.80%, with 6 consecutive years of growth, a 24% payout ratio and a B safety grade. Brookfield yields 0.75%, has 2 consecutive growth years, a 48% payout ratio and a C grade. FSK combines its 18.26% yield and 2-year growth record with a 7,000% earnings payout ratio and D safety grade. The comparison places FSK at the high-income, low-coverage end of the group.

The peers are not operationally identical. FSK is a business development company whose earnings depend heavily on interest income and credit results from a private-loan portfolio. BlackRock, Blackstone, KKR and Brookfield operate broader asset-management franchises. The yield, payout and safety comparisons remain useful, but their different business models affect how each company generates and funds dividends.

What to watch

The first item is quarterly net investment income, because management has explicitly linked that measure to the distribution. FSK’s move from $0.42 to a subsequent $0.44 payment illustrates how closely the declared amount can follow quarterly results.

Credit quality is the second item. Investors can track non-accrual investments, net asset value, realized and unrealized losses, repayments and leverage. Management’s portfolio-rotation program is intended to reduce exposure to weaker assets, while the share-repurchase program and debt reduction compete with new originations for capital.

The incentive-fee waiver also matters because the company said it supported net investment income and the later distribution. The adviser agreed to the waiver for four consecutive quarters, after which the board is expected to review the fee structure. Progress on the preferred-stock financing, repurchases and portfolio contraction will show how FSK balances common-stock distributions against balance-sheet repair. The preferred-stock closing announcement confirms that the strategic financing was completed.

Payment details

The dividend covered by this event was $0.42 per share, down from $0.48, and was paid quarterly. June 17, 2026 was both the ex-dividend date and the record date identified in the declaration. To receive a dividend, an investor generally must own the shares before the ex-dividend date; buying on or after that date does not convey the right to that payment.

FSK’s stated annual dividend is $2.04 per share. At that annual rate, 100 shares generate $204.00 in annual dividend income before taxes and any reinvestment. The annual figure reflects the stated forward amount, while actual quarterly distributions can change under FSK’s net-investment-income-based policy.