FS KKR Capital Initiated with Neutral Rating by Lucid Capital, Base Dividend Cut Expected in 2026

Lucid Capital initiates coverage of FS KKR Capital with a Neutral rating and $18 price target. The firm expects a cut to FS KKR's base dividend in 2026 to 50c from 64c, and the institution of a variable supplemental dividend. The company is in a cycle of net asset value erosion due to elevated non-accruals and investment losses.

Lucid Capital has initiated coverage of FS KKR Capital (FSK) with a Neutral rating and a $18 price target. The firm expects a cut to FS KKR's base dividend in 2026 to 50 cents from 64 cents, and the institution of a variable supplemental dividend. The company is currently experiencing a cycle of net asset value erosion due to elevated non-accruals and investment losses [1].

FS KKR Capital, a leading Business Development Company (BDC), has been under scrutiny for its financial performance. The analyst at Lucid Capital notes that the company's net asset value has been eroding due to elevated non-accruals and investment losses. This has led to a reduction in the base dividend and the introduction of a variable supplemental dividend to manage the company's financial health.

The analysts at Lucid Capital have also highlighted the company's focus on senior secured structures in the upper middle market, which accounts for a significant portion of its investments. Despite the challenges, FS KKR Capital continues to operate within a diversified and defensive portfolio, focusing on non-cyclical sectors.

The company's total assets under management (AUM) as of June 30, 2025, stood at approximately $29.1 billion, making it one of the leading BDCs in the market [2].

FS KKR Capital has been proactive in managing its portfolio, with rigorous monitoring and internal workout capabilities. The company's debt investments have focused on senior secured structures, with a cumulative investment of $22.4 billion since 2018, contributing significantly to its portfolio [2].

Investors should closely monitor FS KKR Capital's financial performance and the implementation of the variable supplemental dividend. The company's ability to navigate the current challenges and maintain its position as a leading BDC will be crucial for its long-term success.

References:
[1] https://www.tipranks.com/compare-stocks/bdc-stocks
[2] https://www.marketscreener.com/news/fs-kkr-capital-fsk-debt-investor-presentation-august-2025-ce7c51d8d88dfe26