Three business development companies are flashing yields that stop income investors cold: FS KKR Capital Corp (NYSE:FSK | FSK Price Prediction) at 26.5%, Stellus Capital Investment (NYSE:SCM) at 16.7%, and Trinity Capital (NASDAQ:TRIN) at 13.7%. Yields that high are either an opportunity or a warning. In this case, the answer depends heavily on which BDC you are looking at.
FSK: A 26% Yield Built on a Shrinking Foundation
FSK’s yield looks extraordinary because the stock has collapsed. Shares are down 44% over the past year to around $10, which mathematically inflates the yield on any fixed distribution. That price decline is the market’s verdict on the underlying fundamentals, and the fundamentals support the concern.
Net investment income has been falling steadily. Full-year NII dropped from $937 million in 2024 to $701 million in 2025, a steep decline in one year. The distribution itself already signaled stress before that trend became undeniable.
NAV per share eroded from $23.37 to $21.99 in just two quarters. Non-accrual loans, meaning borrowers who have stopped making payments, sat at 2.9% of fair value as of Q3 2025, well above what most BDC investors consider comfortable.
The distribution itself already signaled stress. In Q2 2025, FSK paid out $0.70 per share while earning only $0.62 in NII, meaning the payout exceeded what the company actually earned. The upcoming January 2026 distribution dropped to $0.48 per share, down from the $0.70 quarterly rate maintained throughout 2025. That cut has already arrived.
SCM: The Dividend Was Already Cut
Stellus cut its monthly dividend from $0.1333 to $0.1133 starting in January 2026, a 15% reduction after 48 consecutive months at the higher rate. The stock has fallen 29% year-to-date to around $8.77, and trades at just 0.67 times book value. When a BDC trades that far below NAV, the market is pricing in further portfolio deterioration.
The Q4 2025 net loss of $21.8 million is the most direct red flag. Through the first three quarters of 2025, quarterly net income ranged from $5 million to $10 million. Something went wrong in Q4, and without a full earnings report explaining the loss, the dividend at its new lower level still cannot be called safe with confidence.
TRIN: The One That Actually Earns Its Yield
Trinity Capital is the outlier here. The stock is up 10% over the past year while FSK and SCM have been collapsing. NAV per share rose to $13.42 in Q4 2025, up from $13.31 the prior quarter.
Full-year NII grew from $164.8 million in 2024 to $199 million in 2025. The company also carries a $68.7 million undistributed earnings spillover, which acts as a buffer if NII softens.
Trinity’s NII coverage ratio on its prior $0.51 quarterly dividend was 102%, meaning it earned more than it paid out. The transition to $0.17 monthly payments in 2026 monthly payments in 2026 keeps the annualized rate consistent with prior quarters, and the low non-accrual rate of 0.7% of the debt portfolio suggests the underlying portfolio is holding up.
The primary risk to that picture is interest rate sensitivity. With 82.9% of the debt portfolio is floating rate of the debt portfolio in floating-rate instruments, the Fed’s three rate cuts since September 2025 are a direct headwind — effective yield on debt investments already slipped from 16.4% to 15.2% year-over-year, a trend that will pressure NII if rates continue falling.
The Verdict
FSK’s distribution has already been cut and the NII trend gives little reason to expect stabilization. SCM reduced its dividend in January 2026 following a surprise Q4 2025 loss, leaving the new rate on uncertain footing. Trinity is the outlier — its yield of 13.7% is the lowest of the three, but it is the only one where NII is growing, NAV is rising, and the earnings cushion remains intact. The main risk is the Fed: further rate cuts since September 2025 would continue compressing portfolio yield from 16.4% to 15.2% and pressure the NII that supports the distribution.
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