3 Ultra-High-Yield Lenders Paying Over 13%: Which Payouts Hold Up?
Three BDCs with yields over 13% are analyzed for dividend safety. FS KKR (FSK) yields 21.3%, but has negative earnings and a temporary fee waiver. Blue Owl (OBDC) yields 14.4%, with adjusted NII covering its dividend. Blackstone Secured Lending (BXSL) yields 13.1%, with high-quality loans but declining NII coverage. Blue Owl's dividend is deemed most durable.
How this was made
The 30-second read
Why it matters
Provides fresh Q2 data for each BDC, allowing investors to assess dividend sustainability and relative valuation against NAV.
Market read
Key for income‑focused investors; signals potential re‑pricing of high‑yield BDCs based on dividend sustainability.
What to watch
Potential for fee waiver extensions or new capital infusions could improve coverage beyond current figures.
Background
The article reviews three large business development companies (BDCs) with yields above 13%, analyzing dividend coverage, non‑accrual rates, and balance‑sheet metrics.
Ticker impact
FSK reported Q2 net investment income barely covering its 21.3% yield dividend and posted negative trailing EPS, indicating dividend sustainability risk.
downward pressure as investors reassess high yield sustainability
Coverage at 100% and negative EPS suggest the 21.3% yield is unsustainable, prompting potential sell‑off.
OBDC cut its base dividend to $0.31 and posted Q2 adjusted NII of $0.34, providing modest coverage for its 14.4% yield.
stable to slightly positive as coverage improves and leverage is low
Improved coverage and low leverage support the current payout, limiting downside risk.
BXSL announced its next dividend payment for today and reported Q2 NII covering 97% of the $0.77 payout, the lowest coverage among the three.
potential downside if NII continues to erode
Near‑full coverage but declining trends could trigger investor caution.
Market effects
Highlights dividend sustainability risk in high‑yield BDC space, may prompt re‑rating of similar funds.
U.S. BDC sector focus; limited broader regional effect.
Limited to investors tracking high‑yield BDCs and income‑focused portfolios.
Counterpoint
Despite high yields, the strong balance sheets and buybacks could support price resilience.
Key entities
- companyFS KKR Capital
BDC with 21.3% yield, facing coverage and earnings pressure.
- companyBlue Owl Capital Corporation
BDC with 14.4% yield, improved coverage and low leverage.
- companyBlackstone Secured Lending Fund
BDC with 13.1% yield, near‑full coverage but declining NII.
