Eaton Vance Senior Income Trust's Dividend Decline: A High-Yield Alert or a Strategic Shift?

The Eaton Vance Senior Income Trust (NYSE: EVF) has declared its May 2025 dividend at $0.0440 per share, maintaining the same payout as its April distribution. While this flat trajectory might seem stable, it masks a broader trend of declining monthly dividends over the past year—a development that demands scrutiny for income-focused investors. Let’s dissect the numbers, risks, and opportunities lurking beneath this high-yield closed-end fund’s surface.

The Dividend Decline: A Historical Perspective

EVF has long been a stalwart for income seekers, offering consistent monthly distributions. From March 2023 to February 2024, it paid a steady $0.0542 per share monthly, totaling $0.6504 annually. However, starting in April 2024, dividends began a gradual descent, culminating in the current $0.0440 rate (see chart below).

By May 2025, the trailing 12-month (TTM) dividend had dropped to $0.570, a 12.4% decline from its peak in mid-2024. This shift has compressed the fund’s yield to 9.35% (based on its May 1 closing price of $5.65), down from 11.1% a year earlier.

Why the Decline? Unpacking the Fundamentals

EVF invests primarily in senior secured floating-rate loans, which typically provide steady income but are sensitive to interest rate and credit cycles. Three factors likely underpin the dividend slide:

1. Pressure on Income Generation:
   Floating-rate loans often reset with prevailing rates, but widening credit spreads or defaults could reduce distributable income. The fund’s payout ratio—a measure of dividends relative to earnings—has reached 97.5%, leaving minimal room for error.

1. Structural Challenges in Closed-End Funds:
   Unlike ETFs, closed-end funds can trade at discounts to their net asset value (NAV). EVF’s discount has averaged 15% over the past year, reducing the fund’s capital base and complicating dividend sustainability.

2. Sector-Wide Headwinds:
   Senior loan performance has lagged in a rising-rate environment, with many funds in the sector trimming payouts. EVF’s 5-year yield-on-cost of 17.55% (for early investors) may reflect past strength, but current conditions are less forgiving.

Risks to Consider

• High Payout Ratio: At 97.5%, EVF’s payout ratio rivals that of REITs, which are legally required to distribute 90% of taxable income. This leaves little margin for error if income shrinks further.
• Leverage Exposure: Closed-end funds often use leverage to amplify returns, but this increases volatility. EVF’s use of leverage (if any) isn’t specified here, but it’s a common risk in its peer group.
• Credit Quality: A downturn in corporate credit markets could hurt the value of EVF’s loan portfolio, directly impacting dividends.

Is EVF Still a Buy?

Despite the dividend decline, EVF retains two compelling hooks for income investors:

1. High Yield: At 9.35%, its distribution rate outpaces most bonds and ETFs. For retirees or income-seekers, this remains attractive—if the fund can stabilize payouts.
2. Capital Preservation Focus: EVF targets senior loans, which are less risky than equities or junior debt. Its 5-year total return of 67.39% (vs. -5.27% over 12 months) underscores this stability.

However, the declining dividend trajectory is a red flag. Investors must ask: Is this a temporary adjustment, or a sign of structural underperformance? The fund’s TTM dividend has fallen by over $0.08 per share in just 13 months—a steep drop for a conservative income vehicle.

Conclusion: Proceed with Caution

Eaton Vance Senior Income Trust remains a high-yield beacon in a low-interest-rate world, but its dividend decline demands vigilance. Key takeaways:

• The math is clear: A 9.35% yield is enticing, but the payout ratio near 100% suggests dividends are now fully dependent on performance. Any further income contraction could force cuts.
• Compare to peers: EVF’s yield lags behind outliers like OXLC (33.4%) or ECC (25.9%), but its senior loan focus offers lower risk.
• Long-term potential: The fund’s 5-year yield-on-cost of 17.55% shows its value to long-term holders, but newcomers must weigh the risks of buying at current depressed prices.

For now, EVF is a hold for income investors who can tolerate volatility and declining payouts. Aggressive buyers might consider averaging into dips, but the fund’s trajectory requires close monitoring. As the old adage goes: High yield comes with high risk—and sometimes, high regret.

Invest wisely, and stay vigilant.