The Rising Dividend Prowess of CLO ETFs: Why Eldridge AAA CLO ETF (CLOX) Stands Out in September 2025

Collateralized loan obligations (CLOs) have emerged as a compelling asset class for income-focused investors, particularly as traditional fixed-income yields remain subdued. Among the growing cohort of CLO ETFs, the Eldridge AAA CLO ETF (CLOX) has distinguished itself in September 2025 with a 4.84% annual dividend yield, outpacing the 4.04% forward yield of The Clorox Company (CLX) and offering a more sustainable alternative to high-yield peers like CLOZ [2][5]. This article examines why CLOX’s disciplined approach to credit quality and active management positions it as a standout option for investors seeking reliable income in a volatile market.

Dividend Sustainability: A Foundation of Credit Quality

CLOX’s dividend consistency stems from its focus on AAA-rated CLOs, which are collateralized by high-grade corporate loans and historically exhibit minimal default risk. According to data from the ETF’s prospectus, the fund has maintained monthly distributions ranging from $0.09766 to $0.14587 per share over the past year, reflecting its objective to generate stable income [1][3]. This consistency is underpinned by the fund’s active management strategy, which prioritizes investment-grade collateral and avoids speculative-grade assets. As stated by Eldridge Structured Credit Advisers, the fund’s manager, “CLOX’s portfolio is designed to preserve capital while delivering predictable cash flows, even in stressed market conditions” [3].

The fund’s credit quality is further reinforced by its zero-loss record in its underlying CLO holdings, a testament to the robustness of its collateral selection [3]. This contrasts with riskier CLO ETFs that may rely on lower-rated tranches, which are more susceptible to economic downturns. For investors, this means CLOX’s dividend is less likely to be disrupted by credit events, a critical factor in an era of rising interest rates and economic uncertainty.

Yield Attractiveness: Balancing Risk and Reward

While CLOX’s 4.84% yield is lower than the 9.17% SEC yield of its peer CLOZ, it offers a more sustainable trade-off between income and risk [4]. High-yield CLO ETFs like CLOZ often leverage aggressive strategies or lower-rated collateral to boost returns, which can expose investors to liquidity risks and spread volatility [6]. In contrast, CLOX’s focus on AAA-rated CLOs ensures its yield is supported by strong cash flows from high-quality corporate borrowers, reducing the likelihood of downgrades or defaults.

This balance is reflected in CLOX’s performance metrics. As of July 2025, the fund delivered a 5.62% 1-year return, outperforming both its ETF Database Category average and the FactSet Segment average [1]. Its 20-day volatility of 1.05% places it in the mid-range of its peer group, suggesting it offers a smoother ride than more aggressive CLO ETFs [1]. For income investors, this means CLOX provides a reliable yield without sacrificing capital preservation—a rare combination in today’s market.

Active Management and Portfolio Structure

CLOX’s success is also driven by its active management approach. The fund’s non-diversified structure allows it to concentrate assets in its top 50 holdings, with 72.70% of assets allocated to these positions [1]. While this concentration could amplify risk, the fund’s focus on AAA-rated CLOs and its manager’s expertise in structuring collateralized loan portfolios mitigate potential downsides. Eldridge’s team has demonstrated a track record of navigating credit cycles, as evidenced by CLOX’s 6.98% average annual return since its July 2023 inception [1].

However, investors should note that CLOX’s strategy is not without challenges. Its $204.5 million in assets under management is modest compared to larger CLO ETFs, which could limit liquidity in extreme market conditions [2]. Additionally, the fund lacks ESG (environmental, social, and governance) scores, which may deter sustainability-focused investors [1]. That said, for those prioritizing yield and credit quality, these drawbacks are secondary to the fund’s core strengths.

Conclusion: A Compelling Case for Income Investors

In a market where dividend sustainability is paramount, CLOX’s disciplined approach to credit quality and active management sets it apart. By targeting AAA-rated CLOs and maintaining consistent distributions, the fund offers a reliable income stream with lower risk than its high-yield peers. While it may not match the eye-popping yields of CLOZ, its balance of yield, performance, and credit strength makes it an attractive option for investors seeking to anchor their portfolios in stable, income-generating assets.

Source:
[1] CLOX Eldridge AAA CLO ETF [https://etfdb.com/etf/CLOX/]
[2] Eldridge AAA CLO ETF CLOX:NYSE Arca [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=CLOX]
[3] Eldridge AAA CLO ETF (CLOX) [https://cloxfund.com/]
[4] CLOZ: 4 Reasons Why I Am Bullish [https://seekingalpha.com/article/4701959-cloz-4-reasons-why-i-am-bullish]
[5] The Clorox Company (CLX) Stock Price, News, Quote & History [https://finance.yahoo.com/quote/CLX/]
[6] JBBB vs PMAR Comparison | Discover Similar ETFs, Stock ... [https://double.finance/p/stock/JBBB/PMAR]