Eagle Point Income Company's 11.8% Yield Presents a Compelling Opportunity at Current Prices

Investors seeking high income in a low-yield world often face a trade-off between safety and returns. Eagle Point Income Company (EIC), a closed-end fund specializing in collateralized loan obligations (CLOs), currently offers a trailing 12-month yield of 11.8%—a figure that stands out amid rising interest rates and market volatility. While EIC's stock price has dipped recently, its discount to net asset value (NAV) and consistent distribution history suggest this could be an opportune entry point for income-focused investors.

The Case for EIC: Income, Resilience, and a Strategic Discount

EIC's strategy revolves around investing in junior tranches of CLOs, which are structured credit instruments that pool corporate loans and distribute cash flows to different “tranches” of investors. The fund focuses on senior and mezzanine tranches, which typically offer higher yields than senior loans while benefiting from the structural protections of CLOs. This approach has allowed EIC to maintain monthly dividends of $0.20 per share since early 2024, with a consistent payout that has not been cut despite market stress.

As of April 30, 2025, EIC's NAV per share was estimated between $13.73 and $13.83, while its stock price closed at $13.32 on June 10, 2025—a 2.3% discount to NAV. This valuation gap, common in closed-end funds, creates a potential margin of safety for investors. Historically, EIC has traded at a slight premium to NAV, making the current discount a rare entry point.

Key Drivers of EIC's Value

1. CLO Resilience:
   CLOs have proven robust in stress environments, as their cash flows are tied to the performance of diverse corporate loans. EIC's focus on top-tier collateral managers and well-structured CLOs reduces exposure to idiosyncratic risks. For instance, the fund's portfolio includes CLOs originated by firms like Guggenheim and Fortress, which have strong track records.

2. Stable NAV Growth:
   Despite macroeconomic headwinds, EIC's NAV has shown resilience. From April 2024 to April k, the NAV per share rose from $14.90 to $13.73–13.83—a decline of just 7.7% over 12 months—while the stock price fell more sharply, creating the current discount. This divergence suggests the market is underappreciating the fund's underlying asset quality.

3. High Dividend Consistency:
   EIC's $0.20 monthly dividend (equivalent to an 11.8% annual yield) is underpinned by its portfolio's cash flows. The fund's leverage ratio of 32.08% (as of late 2024) remains prudent for its sector, and its focus on floating-rate CLO tranches should benefit from rising interest rates, which increase the value of its floating-rate assets.

Risks to Consider

• CLO Liquidity Risks:
  CLOs are less liquid than traditional fixed-income instruments, and selling assets during a market downturn could force EIC to realize losses. However, the fund's long-term holding strategy mitigates this risk.

• Interest Rate Sensitivity:
  Rising rates could pressure CLO valuations if corporate defaults rise. However, the fund's focus on senior and mezzanine tranches, which rank higher in priority, should cushion against defaults.

• Expense Ratio:
  EIC's 7.44% expense ratio (as of 2023) is high for a fund, but its yield comfortably covers costs, leaving ample room for distributions.

Investment Thesis: A Contrarian Play on Yield

EIC's current valuation and income profile make it attractive for investors willing to accept sector-specific risks for high returns. The discount to NAV provides a cushion against further price declines, while the 11.8% yield offers meaningful income in an era of low bond yields.

Actionable Takeaway:
Investors seeking income should consider a gradual position-building strategy in EIC, using dips below $13.50 as entry points. The fund's NAV stability and distribution consistency suggest it could outperform broader markets over a 12–18-month horizon, especially if CLO spreads narrow.

In conclusion, Eagle Point Income Company's combination of a high yield, resilient NAV, and a temporary discount offers a compelling risk-reward trade-off for income investors. While not without risks, the fund's structural advantages and management expertise make it a candidate for portfolios needing to generate meaningful cash flow.