Three BDC lenders are dangling yields above 13%, but a sky-high payout on one of them comes with a trail of red flags that most income investors miss until it is too late to get out whole.
dividend, how many loans have stopped paying, and where the stock trades against book value.
FS KKR Capital: A 21.3% Yield Flashing Warning Lights
FS KKR Capital (NYSE:FSK | FSK Price Prediction) yields 21.3%, the highest of the three. Read that number as a warning before you read it as an opportunity. When a lender’s yield goes above 20%, the share price is usually telling you the market expects more trouble. The payout history supports that reading. FS KKR paid $0.70 in each quarter of 2025. In 2026, the payments fell to $0.48, $0.42, and $0.44. The trailing 12-month total is $2.04, compared with an annualized forward figure of $1.76.
Coverage: Second-quarter NII came in at $0.44 per share, exactly matching the $0.44 third-quarter distribution. An outside factor helped that match: KKR is giving up 50% of its subordinated income incentive fee for four quarters starting in Q2. Before the cut and the waiver, first-quarter adjusted EPS of $0.41 did not cover the $0.48 distribution. The company also said it may pay distributions from
The trailing EPS of -1.41 is the second warning sign. GAAP earnings include realized and unrealized losses on the loan book. In the first quarter alone, FS KKR posted a GAAP loss of $1.57 per share on $558 million in net losses, with another $154 million in Q2. Negative earnings mean the loan book is losing value faster than interest income can replace it. A smaller asset base produces less NII in future quarters, which is the money that pays your dividend.
Bull case: KKR has committed its own capital. It bought $150 million of convertible preferred stock and completed a $150 million tender offer at $11.00 per share. FS KKR has also repurchased about 3.7 million shares at roughly $10.73, well below NAV. In the Q2 release, CEO Michael C. Forman said FSK “reduced net leverage to within our target range, and made progress reducing our non-accrual assets.”
Risk: The fee waiver is temporary, and the portfolio is shrinking. Q2 sales and repayments totaled $1.33 billion against $590 million in purchases. When the waiver ends, a smaller book must cover the payout on its own.
Blue Owl Capital Corporation: A Reset Dividend With Room to Spare
Blue Owl Capital Corporation (NYSE:OBDC) yields 14.4%. Management cut the base dividend to $0.31 from $0.37 to match the company’s go-forward earnings power, and it still pays occasional supplementals. The latest supplemental was $0.02, paid 2026-09-15. The annualized forward amount of $1.24 is below the trailing total of $1.38, so budget your income around the lower base.
Coverage: The adjustment is working. Second-quarter adjusted NII of $0.34 beat the $0.32 consensus and covered the $0.31 base with room for a supplemental. In the first quarter, by contrast, NII of $0.31 fell short of the old $0.37 base. CEO Craig W. Packer pointed to “a 9.6% annualized return on adjusted net investment income and healthy dividend coverage.”
Bull case: An investment-grade rating, low leverage, and a base dividend that fits current earnings make this the clearest coverage story of the three. Shares are down 11.28% year-to-date, so the discount to book is wider than it was in January.
Risk: Earning power is under pressure. New commitments are yielding 8.7%, down from 9.7% a year ago, and Q2 repayments of $747 million far topped financings of $219 million.
Blackstone Secured Lending Fund: Best Loan Book, Thinnest Cushion
Blackstone Secured Lending Fund (NYSE:BXSL) yields 13.1%, and it has the steadiest payout record in this group. It has paid $0.77 every quarter from the 2023-09-28 ex-dividend date through 2026-09-30, and the latest payment is scheduled for 2026-10-23, which is today.
Coverage: This is the weak spot. Second-quarter NII of $0.75 covered 97% of the dividend. Coverage has slipped each quarter, from 106% to 104% to 100% to its current level, while NII per share fell from $0.82 as base rates came down.
The bull case: the market believes this book more than the others. Shares are up 1.92% over the past year while FS KKR and Blue Owl fell by double digits. Brad Marshall said the fund had “no new assets placed on non-accrual” in Q2, and that the portfolio is “underpinned by stable EBITDA growth across our borrowers.”
Risk: If rates keep falling, NII will probably keep drifting lower. Two more quarters below full coverage would put pressure on the board to cut the $0.77 payout.
Which Over-13% Payout Holds Up Best
Blue Owl’s adjustment-based dividend of $0.31 looks like the most durable of the three. It is covered by $0.34 of adjusted NII, backed by the company’s lowest leverage in two years, plus an investment-grade rating. Blackstone Secured Lending has the clearest loan book, but at 97% coverage, its long-steady payout leaves little room for error. FS KKR pays the biggest check, and its 21.3% yield, negative trailing EPS, and temporary fee waiver all point to it being the least secure of the three (the same cluster of red flags we broke down in a free guide to spotting dividend traps before the cut).
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
