FS KKR Capital

FSK

Market cap $3.01B

I have gathered 20 BDC short interest statistics. What I found out surprised me - i.e., my top (quality) BDC picks are among the most shorted ones. In the article I've unpacked this situation and explained the potential drivers from the short sellers' perspective.

BDCs have fallen out of favor. Given the elevated risks (at least as suggested by headlines), most durable income investors consider only top-quality BDC picks. While this coincides with my philosophy, the issue is that the return potential is automatically lower here.

FS KKR Capital Corp already cut its distribution in Q1 2026, dropping from $0.70 to $0.48 per quarter, and the stock has fallen so far that even the reduced payout still looks eye-catching on paper.

PHILADELPHIA and NEW YORK, April 9, 2026 /PRNewswire/ -- FS KKR Capital Corp. (NYSE: FSK) announced today plans to release its first quarter 2026 results after the close of trading on the New York Stock Exchange on Wednesday, May 6, 2026. FSK will host its first quarter 2026 results conference call via live webcast on Thursday, May 7, 2026 at 9:00 a.m.

Currently, BDCs provide very high-yield opportunities. The fact that additional interest rate cuts are unlikely to happen this year should theoretically support the existing levels. Yet for most BDCs, the damage has already been done.

The higher yields we choose, the more risks we introduce in our portfolios. Usually, the double-digit level is the tipping point from which the risks start to increase exponentially. The 14%+ yielding zone is very dangerous (packed with many landmines and only few areas of safety).

Retirement income portfolios should prioritize meaningful dividend yields to avoid principal drawdown. Predictable and frequent cash flows, ideally monthly, are essential for reliable retirement income. Stress-free investments are key to minimizing worry during adverse economic conditions and avoiding income cuts.

A wave of negative headlines and mounting pressures has created a sudden panic in the private credit industry, leaving massive discounts in its wake. Declining net investment income and tightening spreads have forced dividend cuts, but this disruption is masking a rare, golden buying opportunity. While some management teams are failing to show confidence in their own books, triggering severe credit rating downgrades, others are eating their own cooking and rewarding shareholders.

Moody's recently downgraded FS KKR Capital Corp. from investment grade to junk due to asset quality concerns. Elevated non-accruals and other asset quality issues are central to FSK's deteriorating credit profile. Fading prospects for rate cuts create more risks than opportunities for FSK given the struggling loan book.

Two popular BDCs offer sky-high yields and deep discounts to NAV after the recent sector-wide sell-off. One is a very attractive "Buy," while I am avoiding the other one. I detail how to sort the wheat from the chaff when analyzing deep value BDC opportunities like GBDC and FSK.