10 Best BDC Stocks To Invest In

04. FS KKR Capital Corp. (NYSE:FSK)

Number of Hedge Fund Holders: 13

FS KKR Capital Corp. (NYSE:FSK) emerges as a standout choice among business development companies (BDCs) due to its strategic focus on providing tailored credit solutions to private middle-market U.S. companies. The firm specializes in senior secured and subordinated debt investments, often combining these with equity interests like warrants or options. This approach allows FS KKR Capital to cater to a diverse range of middle-market firms, enhancing its potential for high returns.

For Q2 2024, FS KKR Capital Corp. (NYSE:FSK) reported net investment income of $0.77 per share and adjusted net investment income of $0.75 per share, both of which surpassed market expectations. The company’s portfolio continued to perform well, with a substantial $2.7 billion in investments originated during the first half of the year. Notably, its liquidity position remains strong, with approximately $4.7 billion available as of the end of the quarter.

The firm’s investment strategy includes a focus on senior secured loans, with 58% of its portfolio comprised of first lien loans and 66% in senior secured debt. This conservative approach helps mitigate risk while maintaining substantial exposure to high-quality assets. FS KKR Capital Corp. (NYSE:FSK) portfolio also includes investments in asset-based finance and corporate bonds, providing a well-rounded investment approach. The company declared a third-quarter distribution of $0.70 per share, which includes a base distribution of $0.64 and a supplemental distribution of $0.06. With a projected total distribution of $2.90 per share for 2024, this equates to a compelling yield of approximately 15% based on the recent share price and a 12.1% yield on the net asset value of $23.95 per share. This robust yield underscores FS KKR Capital’s commitment to delivering substantial returns to its shareholders.

Looking forward, FS KKR Capital Corp. (NYSE:FSK) is well-positioned to continue its strong performance despite a competitive lending environment and potential interest rate adjustments by the Fed. The firm’s solid investment income, significant liquidity, and high dividend yield make it a noteworthy addition to any BDC-focused investment portfolio.