Eagle Point Credit Company Inc (ECC) Educational Report

Eagle Point Credit Company Inc (ECC) is an ETF designed to provide income to investors. While it offers a very high distribution yield, the fund has experienced significant share-price declines over the last several years.

What the Numbers Show

The current price of ECC is $3.09. When looking at the price returns (which measure only the change in share price), the numbers show a downward trend:

• Year-to-Date (YTD) Price Return: -46.35%

• One-Year Price Return: -54.15%

• Three-Year Price Return: -69.16%

The total return figures, which include distributions, are also negative. The one-year total return is -41.21%, and the three-year total return is -40.68%. An estimated price from roughly one year ago was $6.74.

Income and Distribution Explanation

ECC is known for paying out cash to investors frequently. It usually pays monthly and has made 12 payouts in the last year.

The distribution yield is 38.84%, which is very high. However, it is important for beginners to know that a high yield alone can be misleading. A high distribution rate does not guarantee that the investor's original investment is safe. In this case, the total return is lower than the distribution yield, meaning the cash payments did not offset the drop in share price.

Price and NAV Erosion Explanation

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, the price-based evidence is significant. ECC has a severe erosion-risk flag and an erosion score of 10, which is labeled as "Severe price erosion." This means the fund's share price has dropped substantially over time.

Pros

• High Cash Flow: The fund provides frequent, usually monthly, distributions.

• High Yield: The distribution yield is significantly higher than many traditional ETFs.

Cons

• Severe Price Decline: The share price has fallen sharply over the short and long term.

• Negative Total Returns: Even with the high distributions, the overall return for investors has been negative over the last one, three, and five years.

• Low Income Grade: The fund has an income rating grade of "F."

Beginner Takeaway

ECC is a high-yield fund that provides a lot of immediate cash income. However, that income has come alongside a severe decline in the share price. For income investors, principal stability is important because if the share price falls faster than the distributions pay out, the total value of the investment shrinks.