Updated on September 26th, 2025 by Bob Ciura
Real estate investment trusts sometimes have high dividend yields in excess of 10%. Ellington Credit Company (EARN) is one such example. The stock has a massive dividend yield of 16.9% today.
High-yielding stocks can sometimes be a warning sign that significant challenges are impeding the business. For Ellington, as the share price drops due to its circumstances, the dividend yield increases.
Ellington may not be a well-known stock, but in October 2021, the corporation chose to modify its dividend payment schedule from quarterly to monthly.
That means EARN is on the list of monthly dividend stocks.
We’ve compiled a list of 80+ monthly dividend stocks, along with important financial metrics like dividend yields and payout ratios, which you can view by clicking on the link below:
This article will analyze the investment prospects of Ellington Credit Company in detail.
Business Overview
Ellington Credit Company is a closed-end fund focused on corporate CLOs, primarily mezzanine debt and equity tranches. The corporation trades on the NYSE under the ticker symbol EARN.
EARN is headquartered in Old Greenwich, Connecticut and is a small-cap company with a market capitalization of ~$214 million. Ellington Credit Company is externally managed by an affiliate of Ellington Management Group, LLC.
In April 2024, Ellington Residential Mortgage REIT changed its name to Ellington Credit Company, and announced its intention to transform into a collateralized loan obligations (“CLOs”)-focused company, moving away from its focus on MBS. On January 17, 2025, shareholders voted and approved of the conversion.
On April 1st, 2025, Ellington Credit completed its conversion into a CLO-focused closed-end fund.
On August 19th, 2025, Ellington Credit reported its first fiscal quarter results for the period ending June 30, 2025. The company generated net income of $10.2 million, or $0.27 per share. Ellington achieved adjusted net investment income of $6.6 million in the quarter, or $0.18 per share.
At quarter end, Ellington had $36.6 million in cash and cash equivalents.
Growth Prospects
Ellington has seen its adjusted distributable earnings (referred to as core earnings prior to Q2 2022) per share shrink rather than grow for the most part. However, since 2019, the annual growth rate has been 5.3%.
In its first few years, the company held its share count consistent, but following 2016, the number of shares outstanding has grown, which can be another barrier to growing earnings on a per share basis.
In April 2024, Ellington Credit began the refocusing and rotation of its portfolio into CLOs. In the most recent quarter, the company grew its CLO portfolio by 27% sequentially to $317 million. Furthermore, its capital allocation to CLOs rose to 87%.
Given the refocusing of Ellington’s business plan, along with its poor track record of earnings growth, we expect EPS growth of 6% per year over the next five years.
Competitive Advantage & Recession Performance
Ellington claims that its portfolio managers are among the most experienced in the MBS sector and its analytics have been developed over the company’s 30-year history.
The company possesses advanced proprietary models for prepayments and credit analysis. Also, approximately 20% of the company’s employees are focused on research and information technology.
While the company’s details were not public in the 2008 real estate crash, a recession of that magnitude would most definitely affect EARN.
Its focus on government-sponsored MBS provide some safety, but a prolonged recession in the future would likely affect EARN’s bottom line, and result in further dividend reductions.
Dividend Analysis
The dividend has been cut nearly every single year in its history with an increase in 2021, followed by the dividend schedule being modified to monthly over quarterly, which some shareholders may appreciate.
And in May 2022, the dividend was cut again, by 20%.
In five of the last ten years, the company’s payout ratio was near or above 100%. Currently, even after another dividend cut, the dividend appears to be under heavy pressure.
Still, at a level of $0.96 per share, EARN stock yields nearly 17%. Therefore, EARN stock is still attractive for income investors as a high dividend stock.
But EARN’s dividend is far from trustworthy, given the corporation has had a trail of cuts in the past. The dividend payout ratio is expected at 105% for 2025.
Any time a company’s dividend payout ratio exceeds 100%, it is a red flag as it means the company is payout out more than it brings in through underlying earnings.
As a result, the dividend appears to be unsustainable at the current earnings level.
Final Thoughts
Ellington Credit has a poor historical record, both in core earnings per share and in the dividend. In fact, EARN slashed the dividend for six years in a row leading up to 2021 and then again in 2022.
Despite these constant cuts, the yield remains very high, as the share price has also cratered over the long term. Results are volatile, and thus, quite risky.
Ellington Credit receives a sell rating due to its abysmal dividend history. Furthermore, its dividend is still not on solid footing, leaving it open to even further potential dividend cuts.
Don’t miss the resources below for more monthly dividend stock investing research.
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
Thanks for reading this article. Please send any feedback, corrections, or questions to [email protected].
