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On Monday, RBC Capital Markets updated its outlook on FS KKR Group (NYSE:FSK), increasing the price target from $21.00 to $22.00 while maintaining a Sector Perform rating on the stock. Currently trading at $23.23 and near its 52-week high of $24.10, FSK has demonstrated strong momentum with a 42% return over the past year. The adjustment comes as FS KKR Group’s management provided an optimistic forecast for the company’s dividend distribution in 2025.
Kenneth S. Lee, an analyst at RBC Capital, highlighted the management’s expectation for a total distribution of $2.80 per share in 2025. This projection is based partly on the return of spillover income, which could result in a dividend yield of 11.9% based on the last closing price, surpassing the average of FS KKR Group’s peers. According to InvestingPro data, FSK has maintained consistent dividend payments for 12 consecutive years, with a current dividend yield of 12.14%.
Lee’s commentary also included a revision of estimates to reflect what might be a slower-than-anticipated pick-up in origination activities. Despite this, the analyst expressed increased confidence in the dividend outlook for FS KKR Group.
The updated price target takes into consideration the balanced risk/reward profile of FS KKR Group. According to Lee, the valuation is relatively full, which is balanced by the potential of the legacy portfolio, which represents approximately 11% of the total portfolio.
RBC Capital’s Sector Perform rating remains unchanged as the firm fine-tunes its price target, signaling that they believe the stock will perform in line with other companies in the sector. Lee’s analysis suggests that while there are positive aspects to FS KKR Group’s outlook, there are also factors that investors should consider when assessing the company’s future performance.
In other recent news, FS KKR Capital Corp reported its fourth-quarter 2024 earnings, revealing a slight miss in revenue expectations. The company reported earnings per share of $0.66, which aligned closely with the forecast, but revenue fell short at $407 million against an anticipated $420.09 million. FS KKR Capital’s Net Asset Value per share slightly decreased to $23.64. Despite the revenue miss, FS KKR Capital maintained steady performance, focusing on strengthening its balance sheet and reducing non-accrual investments. The company deployed $4.7 billion in capital throughout 2024, highlighting its proactive investment strategy.
In a related development, Keefe, Bruyette & Woods analyst Paul Johnson raised the price target for FS KKR Group stock to $22.00 from the previous $21.00, maintaining a Market Perform rating. The adjustment reflects FS KKR Group’s strong dividend outlook, with anticipated total dividends of $2.80 per share for 2025. The company’s dividend guidance and the ongoing rotation of legacy assets within its portfolio were key factors in the revised price target. Additionally, FS KKR Capital is preparing for increased M&A activity in the upcoming quarters, aiming to maintain leverage close to the midpoint of its targeted range.
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