3 Private Credit Stocks Cut Their Dividends. Are Blackstone and Hercules Next?
Three business development companies have already slashed their dividends this year, and two of the biggest names in private credit are showing the same warning signs that preceded every cut. Here is what the numbers inside their latest filings reveal.
Private credit was one of the richest income streams of the rate-hike era, and the payouts are now shrinking. Three of the five business development companies (BDCs) below have already cut their dividends. One of them, Prospect Capital (NASDAQ:PSEC), has seen its shares fall 33.56% this year. A high yield is only worth something if the lender can keep making it.
A BDC lends to midsize private businesses and has to pay out most of its income to shareholders. That rule is why yields run high. It also means falling interest rates and loans that stop paying (non-accruals) feed straight through to the dividend. Lenders across the sector have felt it. Sixth Street’s BDC cut its dividend after a quarterly loss in May 2026, according to Bloomberg, and Reuters reported in June 2026 that cash coverage of private credit dividends was thinning.
How to judge it yourself: for a BDC, compare net investment income (NII) per share with the dividend. EPS payout ratios don’t tell you much here. Then check whether net asset value (NAV), credit quality, and leverage are moving the wrong way.
Blue Owl Capital (OBDC): Cut Once, Covered for Now
Blue Owl Capital (NYSE:OBDC | OBDC Price Prediction) paid $0.37 a quarter through April 2026, then cut its regular dividend to $0.31 starting with the July payment. It added a $0.02 supplemental in September. At $9.90, the base dividend yields about 12.5%.
The new payout is covered. Adjusted NII was $0.34 per share, or 110% base coverage, and spillover income adds about $0.29 per share of cushion. Part of that quarter was one-time, though. The Mavis Tire exit alone produced about $0.03 per share of fee income. NAV slipped to $14.26 from $14.41, and privatedebtinvestor.com reported in May 2026 that Blue Owl’s BDCs had marked down their NAVs. Leverage of 1.11 times is a two-year low, which leaves Blue Owl room to handle trouble.
FS KKR Capital (FSK): Coverage With Zero Margin
FS KKR Capital (NYSE:FSK) paid $0.70 a quarter through December 2025. It then paid $0.48 in April and $0.42 in July. It is paying $0.44 in October and December, plus a $0.20 supplemental in December. On the regular payout alone, the yield is about 17.3%, and much of that comes from a 22.41% year-to-date share price decline.
NII of $0.44 per share exactly matches the distribution because FSK pays out 100% of the prior quarter’s NII. That leaves no cushion. A KKR fee waiver added $11 million to NII and runs for only three more quarters. NAV fell to $18.30 from $18.83. Non-accruals sit at 7.1% of the portfolio at cost, and securities class actions are pending. The one bright spot is leverage, which came down to 127% debt-to-equity from 138%. Once the waiver runs out, the payout policy means the distribution could fall with it.
Prospect Capital (PSEC): A Covered Payout, a Shrinking Book
Prospect paid $0.06 a month through late 2024, then $0.045, and has paid $0.035 since June 2026. At $1.49, that comes to about 28.2%. The yield is that high because the price fell: the shares are down 30.53% in a month and 64.97% over five years.
Quarterly NII of $0.15 per share covers three monthly payments at about 143%. Its balance sheet tells a weaker story. NAV fell to $5.71 from $6.56 a year ago, net realized losses for the fiscal year totaled $223.7M, and a $264.5M bond matures in November 2026. Prospect’s own filings warn that distributions to common shareholders top NII. Leverage is a low 28.6% of total assets, and the Valley Electric sale should bring in about $281 million, which helps.
Blackstone Secured Lending (BXSL): Management Is Already Signaling a Reset
Blackstone Secured Lending (NYSE:BXSL) has paid $0.77 every quarter since late 2023, and the stock is down only 1.21% this year. That steady record is what makes its yield of about 13.0% look safe.
NII of $0.75 covered only 97% of the dividend, ending a 28-quarter run of full coverage. Management said it will lean on past earnings “as we transition to a lower dividend level that is aligned with the fund’s longer-term earnings profile.” NAV fell to $25.53 from $26.26, and net leverage of 1.25 times is at the top of its target range. In BXSL’s favor, non-accruals improved to 1.8% at fair value, and retained earnings of $1.77 per share can bridge the gap for a while.
Hercules Capital (HTGC): Strongest Coverage, Not Spotless
Hercules Capital (NYSE:HTGC) has paid $0.47 a quarter since early 2025, close to the $0.48 it paid in 2024. The latest payment combined a $0.40 base and a $0.07 supplemental, for a yield of about 11.5%.
NII covered the base distribution at 125%, and NAV rose to $12.15 from $11.90. There are still warning signs. Non-accruals went from one loan to two, the average credit grade slipped to 2.17 from 2.11, and first-lien exposure fell to 86.8% from 91.0%. Early repayments of $572.1M also raised yields, and that kind of income won’t repeat every quarter—a class action over how Hercules values its portfolio is pending as well.
Yield Alone Won’t Protect Your Income
When a BDC cuts its dividend, its shares usually fall too, so income investors take two hits at once. Of the three that already cut, Blue Owl and Prospect now cover their payouts, and FSK covers its payout only with KKR’s help. Blackstone Secured Lending has openly said it will cut its dividend. NII coverage and NAV are worth tracking in the next earnings report, because a high yield is never a reason to buy on its own (we laid out the seven warning signs that a big yield is about to be cut in a free dividend trap guide).
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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.
