2024-03-07 02:56:10 ET
Summary
- Oxford Lane Capital and Eagle Point Credit have been able to sustain positive total returns despite price declines due to their high distributions.
- OXLC and ECC focus on providing high levels of sustainable income through investing in the equity debt level tranche of collateralized loan obligations.
- However, the equity level tranche is the riskiest of the totem pole structure.
- These funds are best suited for retired or near-retirement investors who rely on income from their investments. If you value maximizing total return, these are not for you.
Overview - Collateralized Loan Obligations
Some dividend investors fall victim to the high yields. Speaking from experience, I understand the thrill of collecting those massive dividend payments and snowballing them into other areas of your account. However, I believe that some yields are harmful and strip value away from us as investors, so I put in some time researching to see if this was the case here. Total return is one of the main indicators I measure when assessing a company or fund's performance and so far, Oxford Lane Capital ( OXLC ) has been able to sustain positive returns even through price declines. Throughout this analysis, I will reference Eagle Point Credit ( ECC ) as it is a similar style fund also offering a large yield.
The way companies like OXLC and ECC bring in profit is from the interest they collect on loans issued to companies that are typically rated below investment grade. As a quick overview, OXLC and ECC both operate as a closed end fund with a focus on providing high levels of sustainable income. Both of the fund's objectives are to optimize their portfolio's total return by investing in the equity debt level tranche of CLOs (collateralized loan obligations)....
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For further details see:
OXLC And ECC: Is The Massive Dividend Yield Worth The Risk?