XFLT: A Powerful Engine For Yield Income

The XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) could use some rebranding. With a lengthy name like that and an even more complicated business model and investment structure, no wonder it is relatively under-appreciated in the marketplace.
Investment Strategy For those unfamiliar with leveraged loans, this is perhaps not the best investment. However, for those willing to stomach the volatility or feel that the yield is too attractive to pass up, read on.
XFLT's portfolio, as of the end of July 2019, was comprised of 41% senior secured first lien loans, 33% CLO equity, 14% CLO debt, 7% secured second lien loans, just under 1% high yield investments, and 4% cash and equivalents. There are 164 holdings in the fund with an average price of 89.35% of par value and an effective maturity of just under 8 years.
Share Price And Dividend Yield
Interestingly, XFLT has traded at times at a premium to NAV, and at times at a discount to NAV (see below figure). Amidst the late December market selloff, XFLT could have been picked up at quite attractive prices in the $7 / share range.

Even at today's levels in the $9 / share range, the distributions paid on a monthly basis represent a nearly 10% payment for investors. Investors may also be attracted to the fact that XFLT has increased its monthly distribution since inception and that more increases are possible along the way.
Investors considering exposure to XFLT should certainly review the... Read more