FSK - FS KKR Capital: A 15% Yield Trading 20% Below Book Value

2024-05-13 00:53:48 ET

Summary

• FS KKR Capital is a reliable business development company with a 15.1% annualized yield and solid credit rating.
• FSK benefits from higher interest rates due to its floating-rate debt, but there are limits to these benefits.
• The company's recent earnings report shows resilience, with impressive net investment income and robust dividend distributions.

Introduction

Receiving dividends is fun - and often necessary to retire (early).

However, when it comes to chasing yield, I'm extremely careful, as I believe the higher the yield, the higher the risk there's something fundamentally wrong with the underlying investment.

That's the so-called "sucker yield."

Companies that fall under the "sucker-yield" definition typically have unpredictable and unreliable earnings histories with unsafe dividend payouts. - Forbes

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