2024-01-29 09:00:00 ET
Summary
- FS KKR Capital Corp has delivered strong returns for income investors, with shares appreciating by 7.91% and paying out significant dividends over the past year.
- The higher rate environment has been beneficial for FSK, allowing them to generate higher yields on their debt investments and increase net investment income.
- FSK is undervalued compared to its peers, trading at a lower market cap to NII multiple and at a discount to its net asset value, while offering a higher yield.
FS KKR Capital Corp ( FSK ) delivered across the board for income investors over the past year. Business Development Corporation's ((BDC)) are more common among income investors rather than investors focused on generating capital appreciation because BDCs must pay out at least 90% of their taxable income to shareholders in the form of a dividend. Over the past year, shares of FSK have appreciated by 7.91% while paying out $2.56 in standard distributions and an additional $0.39 per share in special distributions. This time last year, shares of FSK traded for $19.16, and investors who added FSK to their portfolio at that time generated 15.4% of their original investment in distributed income from the dividend while watching shares appreciate by almost 8%. I am still bullish on shares of FSK going into earnings, as they should continue to generate significant amounts of income for years to come. While BDCs are a relatively unknown investment compared to REITs, I feel the higher rate environment has played a beneficial role in strengthening their future returns. Just because we're likely headed into a rate-cutting environment doesn't mean the BDC story is over, rather, I think FSK will produce similar results for investors in 2024....
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FS KKR Capital Looks Undervalued Heading Into Earnings Yielding 12.38%