The Oxford Lane Capital Corporation (OXLC) has a current forward yield of 24.6%, attracting investor interest despite significant drawbacks. As of now, OXLC’s share price has decreased by over 73% in the past five years, while its dividend has fallen nearly 41%. Investors who opted for this high yield have still seen a loss of 22% in total returns during a period when the S&P 500 nearly doubled.
OXLC primarily invests in collateralized loan obligations (CLOs), which are high-risk financial instruments. Despite high yields, the fund’s net asset value has plummeted from nearly $100 in the early 2010s to just above $10 now, making it difficult for OXLC to sustain its dividend payouts.
Investors are cautioned against being lured by OXLC’s oversized yield, as the underlying financial health of the fund, coupled with high fees, contributes to its underperformance. There are safer CEF options available, with some yielding an average of 9.3% and offering monthly payouts.
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