Updated on May 22nd, 2026 by Felix Martinez
Real estate investment trusts sometimes have dividend yields exceeding 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 changed 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 120+ 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 Ellington Credit Company’s investment prospects 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. 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 the conversion.
On April 1st, 2025, Ellington Credit completed its conversion into a CLO-focused closed-end fund.
The company reported weak fourth-quarter fiscal 2026 results as continued volatility in the collateralized loan obligation (CLO) market pressured earnings and asset values. The company posted a GAAP net loss of $32.3 million, or $0.86 per share, while adjusted net investment income was $7.3 million, or $0.19 per share. Net asset value declined to $4.09 per share despite quarterly distributions totaling $0.24 per share.
The company’s $307.9 million CLO portfolio remained heavily weighted toward CLO equity investments, which were hurt by widening credit spreads, falling leveraged loan prices, and concerns over weakening corporate credit conditions. Management stated that much of the market weakness appeared technical rather than driven by deteriorating fundamentals. During the quarter, Ellington actively traded its portfolio, purchasing $30.7 million and selling $34.2 million of CLO investments while maintaining a defensive hedging strategy.
Ellington also strengthened its balance sheet by issuing $54 million of unsecured senior notes due in 2031, using part of the proceeds to refinance short-term debt and fund new CLO investments. Management said the recent market selloff has improved investment opportunities through higher yields, slower prepayments, and increased refinancing potential, positioning the company for stronger earnings growth in future quarters.
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 kept its share count consistent, but since 2016, the number of shares outstanding has grown, which can be another barrier to per-share earnings growth.
In April 2024, Ellington Credit began refocusing and rotating 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 and 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 provides some safety, but a prolonged recession would likely affect EARN’s bottom line and lead to further dividend reductions.
Dividend Analysis
The dividend has been cut nearly every year in its history, with an increase in 2021, followed by a change in the dividend schedule from quarterly to monthly, 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%. Even after another dividend cut, the dividend appears to remain under heavy pressure.
Still, at a level of $0.96 per share, EARN stock yields nearly 20.1%. Therefore, EARN stock remains attractive to income investors for its high dividend.
But EARN’s dividend is far from trustworthy, given the corporation’s history of cuts. The dividend payout ratio is expected at 112% for 2026.
Any time a company’s dividend payout ratio exceeds 100%, it is a red flag, as it means the company is paying out more than it generates from 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 consecutive years, leading up to 2021, and 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 remains on shaky footing, leaving it open to further 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].
