Eaton Vance Floating-Rate ETF: A High-Yield, Low-Volatility Play in a Rising Rate Environment

In a market where rising interest rates have reshaped fixed-income strategies, the Eaton Vance Floating-Rate Income Trust (EFT) has emerged as a compelling option for income-focused investors. This analysis examines EFT’s dividend consistency and risk-adjusted returns, evaluating its potential as a high-yield, low-volatility play in today’s economic climate.

Dividend Consistency: A Pillar of Income Stability

EFT has demonstrated a robust track record of dividend consistency, a critical factor for investors prioritizing regular income. Over the past three years, the fund has maintained a monthly dividend schedule, with payouts fluctuating slightly in response to market conditions. For instance, in December 2024, EFT distributed $0.103 per share, while October 2024 saw a higher payout of $0.109 per share [1]. As of 2025, the forward annual dividend stands at approximately $1.25 per share, translating to an annualized yield of around 10% [3]. This consistency, even amid rate hikes, underscores EFT’s ability to adapt its dividend strategy to preserve investor returns.

The fund’s focus on floating-rate loans—securities whose interest payments adjust with market rates—provides a natural hedge against rising rates. Unlike fixed-rate bonds, which lose value as rates climb, floating-rate instruments allow EFT to pass on higher yields to shareholders without sacrificing principal stability [1]. This structural advantage positions EFT as a resilient income generator in a tightening monetary environment.

Risk-Adjusted Returns: Balancing Yield and Volatility

While EFT’s dividend consistency is a strength, its risk-adjusted returns warrant closer scrutiny. The fund’s 12-month Sharpe ratio of 0.11 [2] suggests modest compensation for risk taken, outperforming its peer Eaton Vance Senior Floating-Rate Trust (EFR) with a Sharpe ratio of 0.05 [2]. However, the five-year Sharpe ratio of -0.4489 [4] reveals a more nuanced picture: over the longer term, EFT’s returns have underperformed relative to its risk exposure, a common challenge for leveraged credit strategies during periods of market stress.

Critically, EFT’s recent performance aligns with its stated objectives of income generation and capital preservation. Its “above average” historical returns and risk profile [3] indicate that while volatility exists, the fund’s structure mitigates downside risks through its focus on senior secured loans and active portfolio management. For investors prioritizing income over capital appreciation, this trade-off may be acceptable.

Strategic Considerations for 2025

The current macroeconomic environment—marked by sustained rate hikes and a search for yield—amplifies EFT’s appeal. With traditional bond yields compressed and cash alternatives offering limited growth, EFT’s 10% yield [3] stands out as a compelling alternative. However, investors should remain mindful of the fund’s leverage and credit risk, which can amplify losses during economic downturns.

Conclusion

Eaton Vance Floating-Rate Income Trust (EFT) offers a unique blend of high yield and structural resilience in a rising rate environment. While its long-term risk-adjusted returns remain mixed, its dividend consistency and alignment with current monetary policy make it a strategic choice for income-focused investors willing to accept moderate volatility for regular cash flow. As the Federal Reserve’s rate trajectory remains uncertain, EFT’s adaptive structure and disciplined approach to income generation position it as a valuable tool in a diversified portfolio.

**Source:[1] Eaton Vance Floating-Rate Income Trust Dividend History [https://www.wisesheets.io/EFT/dividend-history][2] EFT vs. EFR — Stock Comparison Tool [https://portfolioslab.com/tools/stock-comparison/EFT/EFR][3] Eaton Vance Floating-Rate Income Trust (EFT) Dividend [https://stockanalysis.com/stocks/eft/dividend/][4] Eaton Vance Floating-rate (EFT) Stock Analysis Report [https://www.benzinga.com/quote/EFT/report]