Trade Alert & Earnings: Eagle Point Income Company Inc (EIC)

Eagle Point Income Company published their Q1 earnings on Wednesday, May 28, 2025.

Usually, earnings of Closed-End-funds are nothing special at all, because they publish their NAV on a daily or monthly basis. So the most important thing in earnings press releases is the declaration of dividend. This time it was an unpleasant surprise. EIC cut their dividend from $0.20 monthly to $0.13.

"Earlier today, we declared monthly common distributions of $0.13 per share for the third quarter of 2025” - Thomas Majewski /Chairman and CEO/

This was a surprise dividend cut for us. News for the dividend cut was released before the market open. EIC closed that day on $12.95 from $14.77 the day before. The sharp fall was driven only because of the dividend cut. We do not support the thesis that positions should be averaged when they decline. But this time we did it. 

We increase our current positions with the same dollar amount as the first purchase.

Our decision is driven mostly of these factors:

1/ The Yield

Stock price fall and price discount value increased. Now, EIC trades at a 4.64% discount of its NAV. Historically, the fund trades at a 7% premium to its NAV. This premium was mostly driven by investors' appetite for 18% dividend. At a price of $13.00 the dividend yield drops to 12%. Still a good one on discount to NAV. 

2/ Discount of NAV

Usually, EIC reports its NAV at the end of the second week the month after. We expect CLO funds to report their NAV for May in mid-June. The fund have made some purchases of BB CLO during the volatiles times in the quarter, as the CFO noted in the Conference call.

During the volatility in the latter part of the first quarter, we were able to opportunistically deploy capital into discounted BB CLO debt purchases. In many cases, we were buying at prices that we hadn't seen since the first half of 2024. When we can buy CLO debt at discounts, this gives the potential for what is called convexity or pull to par when markets eventually normalize. Thomas Majewski

3/ Management

We have pointed in our previous article for EIC, one of the reasons for investing in the company is management. Our opinion has not changed despite the recent dividend cut. We are sure it was a hard decision to make this significant change in dividend policy. We are sure this will strengthen company balance sheet and NAV.

Conclusion

We double our position in EIC in dollar average with purchase of additional shares at price of $13.00. Our first entrance in this position was on 25.03.2025 at $15.00 per share. During this period, we have collected $0.40 per share in dividends. After today’s positions increase, our average price drops to $14.00 per share.