3 Private Credit Stocks Cut Their Dividends. Are Blackstone and Hercules Next?
Three BDCs (Blue Owl, FS KKR, Prospect) have cut dividends, with Prospect's shares down 33.56% YTD. Blackstone and Hercules may follow. Blue Owl's yield is 12.5%, covered by NII. FS KKR's yield is 17.3%, but coverage is tight. Prospect's yield is 28.2%, but NAV and losses are concerns. Blackstone's coverage dropped to 97%, signaling a potential cut. Hercules has strong coverage but some credit quality issues.
How this was made
The 30-second read
Why it matters
Dividend reductions and weaker coverage suggest near‑term price weakness for most BDCs, though those maintaining strong coverage may hold steadier.
Market read
The dividend cut signals across multiple BDCs could trigger sector‑wide re‑pricing, especially for yield‑focused investors.
What to watch
Potential upside from upcoming credit‑quality improvements and the impact of lower interest rates on loan performance.
Background
The article reviews recent dividend cuts and coverage metrics across five listed business development companies (BDCs) amid a broader slowdown in private‑credit yields.
Ticker impact
Prospect Capital disclosed a dividend cut to $0.035 per share and a NAV decline to $5.71, indicating weaker earnings coverage.
likely pressure as the market prices in the lower dividend and weaker NAV.
Dividend cuts in BDCs typically trigger share sell‑offs, especially with coverage tightening.
Blue Owl Capital reduced its quarterly dividend to $0.31 and added a $0.02 supplemental, while NAV slipped to $14.26.
moderate pressure as investors weigh lower payout against strong coverage.
Coverage above 100% cushions the dividend cut, limiting downside.
FS KKR Capital's dividend now matches NII ($0.44), leaving no cushion; a KKR fee waiver adds $11 M to NII temporarily.
likely pressure as investors see no buffer for future cuts.
Zero coverage signals vulnerability once the fee waiver expires.
Blackstone Secured Lending signaled a forthcoming dividend reset after coverage fell to 97% of the payout.
likely pressure as the market anticipates a dividend reduction.
Management explicitly flagged a dividend transition, a clear catalyst for price weakness.
Hercules Capital posted a dividend of $0.47 with coverage at 125% and NAV rise to $12.15, but credit quality slipped.
stable to modest upside as coverage remains healthy despite credit grade dip.
High coverage supports the dividend, but deteriorating credit metrics may limit upside.
Market effects
Highlights weakening income streams in the private‑credit BDC sector, prompting investors to reassess yield‑focused allocations.
U.S. BDCs may see broader price pressure, especially in high‑yield income funds.
Limited to U.S. fixed‑income and dividend‑seeking investors; no direct global macro effect.
Counterpoint
Investors could view the dividend cuts as buying opportunities if NAV stabilizes and coverage improves.
Key entities
- companyProspect Capital
BDC that cut its dividend to $0.035 per share.
- companyBlue Owl Capital
BDC that reduced its dividend to $0.31 per quarter.
- companyFS KKR Capital
BDC with dividend now fully covered by NII.
- companyBlackstone Secured Lending
BDC signaling an upcoming dividend reset.
- companyHercules Capital
BDC with strong dividend coverage but slipping credit quality.
