OXLCO - Bargain 8.80% Eagle Point Term Preferred Stock: Antidote To Reinvestment Risk

2024-04-23 12:30:00 ET

Summary

• Fixed-income portfolios with primarily shorter term bonds and term preferred stocks have reinvestment risk.
• Reinvestment risk is the risk that when your bonds mature that interest rates will be lower so you must reinvest that money at lower yields. This lowers your income.
• In my opinion the best fixed-income securities for safety and yield are term preferred stocks issued by closed end funds (CEFs) that invest in CLOs.
• Eagle Point Credit’s term preferred stock that matures in 2031 (symbol ECCC) is definitely my favorite security for helping to minimize your reinvestment risk with its 8.80% YTM.
• In this article we look at and compare term preferred stocks and baby bonds from Oxford Lane and Eagle Point Credit.

Reinvestment Risk

Reinvestment risk is the risk that when your term preferred stocks or your bonds mature that you will not be able to reinvest that money at similar or better yields because interest rates have fallen. This will result in the decline of your future income....

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