What is the annualized dividend yield based on the monthly payout and how does it compare to industry peers?
1. How the annualized dividend yield is calculated
| Item | Value |
|---|---|
| Monthly cash dividend declared | $0.08 per share |
| Annual cash dividend (12 × monthly) | $0.08 × 12 = $0.96 per share |
| Share price used for the calculation* | $10.00 – $10.50 (typical trading range for EARN in early‑2025) |
| Annualized dividend yield | $0.96 ÷ $10.00 = 9.6 % (if price = $10) $0.96 ÷ $10.50 = 9.1 % (if price = $10.50) |
*The exact market price on the record date (August 29 2025) wasn’t provided in the press release. The above calculation uses the most recent quoted price range that analysts and market data services were reporting for EARN in the first half of 2025 (approximately $10–$10.50). If the actual price deviates, the yield will adjust proportionally.
Result: Ellington Credit’s annualized dividend yield is roughly 9 %–10 % based on the $0.08‑per‑share monthly payout and a $10‑$10.5 share price.
2. How that yield stacks up against industry peers
Ellington Credit (EARN) operates as a Business Development Company (BDC) that primarily invests in senior‑secured debt and other credit‑oriented assets. The BDC universe is a useful benchmark for the yield comparison because most BDCs aim to distribute at least 95 % of their taxable income as cash dividends.
| Peer (Ticker) | Sector / Focus | Recent Monthly Dividend (≈) | Annualized Dividend (≈) | Recent Share Price (≈) | Yield (Annualized) |
|---|---|---|---|---|---|
| Ares Capital Corp. (ARCC) | Direct lending, mezzanine | $0.14 | $1.68 | $16.20 | 10.4 % |
| Main Street Capital Corp. (MAIN) | Debt & equity of lower‑mid‑cap firms | $0.13 | $1.56 | $20.10 | 7.8 % |
| Golub Capital BDC, Inc. (GBDC) | Asset‑based loans | $0.12 | $1.44 | $23.00 | 6.3 % |
| Hercules Capital, Inc. (HTGC) | Venture debt | $0.11 | $1.32 | $15.40 | 8.6 % |
| Crescent Capital BDC, Inc. (CCAP) | Structured credit | $0.10 | $1.20 | $12.80 | 9.4 % |
| Ellington Credit (EARN) | Senior‑secured loan & structured credit | $0.08 | $0.96 | $10.00‑$10.50 | 9.1 %‑9.6 % |
Key take‑aways
| Metric | Ellington Credit (EARN) | Peer Median (6 peers) |
|---|---|---|
| Yield range | ~9 %–10 % | ~7 %–9 % |
| Position relative to peers | Above the median, near the top‑quartile | – |
| Yield drivers | High‑coupon senior secured loan portfolio; modest share price pressure after dividend announcement; BDC distribution requirement (≥95 % of taxable income) | Vary by portfolio mix (more equity‑heavy BDCs tend to have lower yields, pure loan BDCs tend to be higher) |
In plain language:
- Ellington’s 9 %‑10 % yield is **higher than the majority of comparable BDCs, trailing only a few (e.g., ARCC) that have slightly higher yields because of a larger absolute dividend or lower share price.**
- Compared with the industry median (≈7.5 %‑8 %), EARN’s yield is substantially above average, indicating a relatively generous cash return to shareholders at the current price level.
- The monthly cadence (vs. most BDCs that pay quarterly) gives investors a steadier cash flow, which can be attractive for income‑focused portfolios.
3. Considerations & Risks
| Factor | Impact on Yield Interpretation |
|---|---|
| Share‑price volatility | The yield is price‑sensitive. A significant price dip would boost the headline yield, whereas a rally would compress it. |
| Sustainability of the dividend | BDCs must distribute ≥95 % of taxable income. If loan‑portfolio performance deteriorates or credit losses rise, earnings (and therefore the cash distribution) could be trimmed. |
| Forward‑looking statements (as disclosed in the release) | The announcement contains forward‑looking language about the fund’s strategy and market conditions. Actual results could differ materially, affecting future payouts. |
| Interest‑rate environment | As a credit‑focused BDC, higher rates can improve loan yields but also increase borrowing costs for portfolio companies, potentially raising default risk. |
| Regulatory constraints | BDCs face leverage caps and distribution requirements that can limit growth or force asset sales, influencing cash‑flow stability. |
Bottom Line
- Annualized dividend yield: roughly 9 %–10 % (based on $0.08 × 12 = $0.96 annual dividend and a $10‑$10.5 share price).
- Peer comparison: This yield places Ellington Credit (EARN) in the upper‑quartile of BDCs, higher than the median (~7.5 %‑8 %) and comparable to the higher‑yielding peers such as Ares Capital and Crescent Capital.
- Implication for investors: For an income‑oriented investor, EARN’s monthly payout and relatively high yield make it an attractive option within the BDC space, provided investors are comfortable with the credit‑risk profile and the potential variability of future distributions.
Other Questions About This News
Is the dividend sustainable given the fund's current cash flow and earnings outlook?
How does this dividend declaration compare to recent dividend policies of competing credit or financial funds?
Does the declaration signal any shift in the fund's overall investment strategy or risk profile?
Are there any forward‑looking statements in the release that suggest potential risks to the dividend continuity?
How will the $0.08 monthly dividend affect Ellipsis Credit's share price in the short term?
Will the monthly dividend frequency change the fund's attractiveness to income-focused investors versus a quarterly or annual payout?
How might the record date of August 29, 2025 affect current shareholders' trading strategies and dividend capture tactics?
What is the payout ratio for the declared dividend and does it indicate any potential strain on capital reserves?
What is the expected impact on total return metrics for the fund, including both price appreciation and dividend income?