FS KKR Capital Corp (FSK) is a private credit investment fund that cut its dividend last quarter. Yet FSK stock still has a 16.6% annual yield. That's if FSK doesn't cut the distribution rate again on May 11 when FSK releases its Q1 earnings before the market opens.
Value investors are looking carefully for a good entry point. One way to do this is to short near-term out-of-the-money (OTM) puts, as I will show in this article.
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FSK closed at $11.55 on Friday, May 1, up 30 cents or 2.67%. In fact, FSK is up from its trough price below $10 at $9.91 on March 27. Moreover, FSK could move up over the next year if the rate stays level.
FSK stock - last 6 months - Barchart - May 1, 2026 As a result, one play investors can play is to set a $10 buy-in price using a cash-secured play. That way, they can get paid 1.0% over the next two weeks while waiting. More on this below.
Will FSK Cut Its Dividend Again?
Management is set to announce the Q2 distribution rate on May 11 before the market closes. Last quarter (Feb. 25), it lowered the Q1 quarterly distribution rate to 48 cents, which had a 45-cent “base rate” and a "supplemental distribution" rate of 3 cents.
So, as it stands, if management keeps the quarterly 48-cent rate (i.e., $1.92 annually) on May 11, FSK has a 16.6% annual yield:
$1.92 / $11.55 = 0.1662 = 16.62%
Keep in mind that after March 2023, FSK Capital maintained its quarterly rate stable. Before this, it would vary each quarter, likely tied to earnings. So, there could be some precedent for management to keep the distribution rate stable.
After all, that tends to help keep the stock less volatile. Investors like to know the annual rate the stock yields.
On the other hand, the FSK's net investment income fell from 57 cents in Q3 to 48 cents in Q4. On an adjusted basis, it declined from 57 cents to 52 cents in Q4 2025.
So, if Q1 2026 net investment income falls again, management may reduce the quarterly rate again. That would push FSK stock significantly lower.
After all, non-performing and non-accrual assets fell from a combined 9.1% of total assets (i.e., 6.2% and 2.9%, respectively) in Q3 to 9.5% in Q4 (i.e., 6.1% and 3.4%):
Q4 FSK portfolio assets - Earnings report released 2/25/26 Investors will pay close attention to this statistic in the upcoming Q1 report. The bottom line now is that as of Q4, the net asset value (NAV) of the fund is $20.89, down from $23.64 in Q3.
That means FSK is trading at just 55.3% of its NAV (i.e., $11.55/$20.89 = 0.553).
So, will it decline further?
What FSK Stock Could Be Worth
Average Yield. One way to value the stock is to look at its historical yield. For example, Seeking Alpha reports that FSK's average yield over the past 5 years has been 15.68%.
That means that if the distribution stays level, the upside potential is about 6%:
$1.92 / 0.1568 = $12.24 target price
Upside: $12.24 / $11.55 = 1.06 -1 = +6.0% upside
However, Yahoo! Finance reports that the average 5-year yield has been 14.07%, and Morningstar says it's been 13.49% over the same period.
The average of these three yields is 14.41%, and so, the target price is higher, giving investors a potential upside of over 15%:
$1.92 / 0.1441 = $13.32 target price
$13.32 / $11.55 = 1.153 -1 = +15.3%
After all, even if FSK rises to $13.32, it would still be signficantly below the NAV of $20.89. For example, let's say the NAV falls 10% to 18.80 in Q1. The $13.32 target price is still just 70.9% of that NAV.
Analysts' Target Prices. Another way to value FSK is to look at other analysts' price targets. For example, Yahoo! Finance's average of 11 analysts is $12.30. That's still 6.5% higher than Friday's close.
Similarly, Barchart's mean survey price target is $12.90, and AnaChart's average of 7 analysts who've written recently about FSK is $15.25. So, all these surveys have an average price target of $13.48. That implies upside of +16.7%.
This is also close to the $13.32 average yield price target. The bottom line is that FSK could be worth between 15.3% to 16.7% more over the next year. That all assumes management does not cut the distribution rate.
If it does, the stock will fall. One way to set a lower potential buy-in point and get paid is to short out-of-the-money (OTM) puts.
Shorting OTM FSK Puts
For example, the May 15 expiry contract period shows that the $10.00 put strike price has a midpoint premium of 10 cents:
FSK puts expiring May 15 - Barchart - As of May 1, 2026 That means that an investor who secures $1,000 with their brokerage firm can enter an order to “Sell to Open” 1 put at $10.00. The $1,000 acts as secured collateral in case FSK drops to $10.00 or lower by May 15 (i.e., after the May 11 earnings and distribution release date).
The account will immediately receive $10 per put option shorted this way. That works out to a 1.0% yield (i.e., $10/$1,000), over 13 days. Moreover, the breakeven point, even if the account is assigned to buy 100 shares at $10.00, is only $9.90, or 14.3% lower than Friday's close.
Note that there is only a 12.6% of this happening based on the delta ratio. Some less-risk-averse investors might consider shorting the $12.50 put.
To do this, they secure $1,250 to buy 100 shares, but the account immediately receives $115. So, the net investment is $1,135 or $11.35, slightly below Friday's close of $11.55. If FSK closes over $12.50 by May 15, the account still keeps the $115, so the net yield is 9.2% (i.e., $115/$1,250).
The bottom line is that FSK could be cheap here, and one way to play it is to short near-term put options.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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