NYSEARCA:CLOZ: High-Yield CLO ETF With Strong Stability and Growth Potential
Real-Time Chart for CLOZ
The Strategic Advantage of Investing in CLOs
Collateralized Loan Obligations (CLOs) have emerged as one of the most attractive debt instruments available to investors in today’s market. With short-term rates elevated and floating-rate structures ensuring resilience in a dynamic interest rate environment, CLOs continue to outperform traditional fixed-income assets. Unlike traditional bonds, which suffer during rate hikes, CLOs are inherently linked to the Fed’s policies, making them a unique hedge in uncertain economic times.
The Eldridge BBB-B CLO ETF (NYSEARCA:CLOZ) stands out among CLO-based investment vehicles due to its 8.78% trailing twelve-month (TTM) yield and a structured allocation that balances higher returns with quality selection. Unlike passive bond ETFs, CLOZ benefits from active management, reducing exposure to underperforming loans while maximizing yield potential.
CLOZ Yield Performance and Market Positioning
CLOZ’s yield has been a significant driver of its outperformance relative to other debt ETFs. The fund’s SEC 30-day yield currently sits at 7.49%, reflecting net investment income, while total returns have surged 30.28% since inception on January 24, 2023.
Comparative Yield Performance
- CLOZ’s 8.78% yield surpasses aggregate bond indices, which have struggled under rising interest rates.
- Compared to high-yield corporate bond ETFs, CLOZ provides superior risk-adjusted returns due to lower default rates.
- The fund’s floating rate structure allows it to maintain yield stability, unlike Treasury bonds or fixed-rate corporate bonds that suffer during rate hikes.
Even as the Federal Reserve signals potential rate cuts, CLOZ remains well-positioned. Assuming a 50 basis point decrease in 2025, CLOZ’s yield is projected to settle between 7.3% and 7.5%, which still outperforms most traditional bond ETFs.
Holdings Breakdown: A Diversified Portfolio with Strong Credit Quality
CLOZ primarily invests in BBB and BB-rated CLOs, avoiding the riskiest lower-grade tranches. Here’s the allocation breakdown:
- BBB-rated CLOs: 51%
- BB-rated CLOs: 40%
- Cash holdings: 8% (for liquidity and dividend payments)
Unlike other CLO funds, CLOZ does not invest in B-rated CLOs, which historically have seen higher default rates. The fund’s managers actively rebalance holdings, ensuring that risk exposure remains controlled while maximizing yield potential.
Low Default Risk in CLOs
Historically, BBB and BB-rated CLOs have default rates below 1%, significantly lower than corporate junk bonds. Over the last decade, the cumulative default rate for BBB and BB CLOs has remained below 2.32%, far lower than the 13.1% to 24.3% seen in high-yield bonds. This makes CLOZ a superior choice for investors seeking high yields with lower credit risk.
CLOZ Dividend Strategy: Stable Payouts with Monthly Distributions
One of CLOZ’s strongest investor advantages is its monthly dividend payout structure, allowing for consistent cash flow. The fund’s average monthly dividend has been around $0.197 per share, with occasional year-end special distributions.
- December 2024 saw two dividend payments, one standard and one special distribution.
- February 2025 witnessed a slight dip in payouts, but historical trends suggest a return to $0.170+ per share in the following months.
- The fund’s TTM yield of 8.78% is expected to decline slightly as rates drop but should remain highly competitive.
Despite potential rate reductions, CLOZ’s floating-rate structure means its income will decline at a slower pace compared to fixed-income alternatives. This ensures continued strong yield generation with minimal capital loss.
Comparing CLOZ to Traditional Fixed-Income Investments
CLOZ vs. Aggregate Bond Index
- Traditional bonds suffered significant losses in 2023 and early 2024 as interest rates climbed.
- CLOZ’s floating rate nature protected it from these declines, allowing it to maintain capital stability while delivering higher yields.
- Unlike fixed-rate bonds, CLOZ’s low duration risk shields investors from interest rate fluctuations.
CLOZ vs. Senior Loan ETFs
- Senior loan ETFs (such as BKLN) have comparable floating-rate structures, but CLOZ boasts better credit quality and lower default rates.
- CLOZ maintains an 8.8% yield compared to 7.5% in senior loan ETFs.
- CLOZ’s actively managed portfolio enhances credit selection, reducing exposure to underperforming loans.
CLOZ vs. High-Yield Bonds
- High-yield corporate bond ETFs (such as SPHY) offer 7.5% yields, but with significantly higher default rates.
- CLOZ provides better downside protection due to its secured loan structure.
- CLOZ’s default rates are typically 5-10x lower than high-yield bonds, making it a superior choice for income investors.
Risk Factors and Market Outlook
Potential Risks
- Interest Rate Sensitivity: While CLOZ benefits from floating rates, a sharp Fed rate cut (beyond the projected 50bp) could lead to lower yields. However, with rates likely staying above 3%, CLOZ remains competitive.
- Liquidity Risk: CLOZ’s holdings, while diversified, are not as liquid as traditional Treasury bonds. Market shocks could lead to temporary pricing dislocations.
- Credit Market Volatility: During periods of extreme market stress, CLOs may face pricing pressure despite low default rates. Investors should monitor credit spreads as an indicator of risk sentiment.
Why CLOZ Remains a Strong Investment
Despite these risks, CLOZ continues to be one of the most attractive fixed-income investments in 2024 and beyond. Its high yield, low sensitivity to rate cuts, and actively managed risk mitigation make it a standout option for income-focused investors. The combination of low default risk, floating rate benefits, and monthly income generation positions CLOZ as a long-term outperformer.
Investment Recommendation: Is NYSEARCA:CLOZ a Buy, Sell, or Hold?
Given its strong yield, low risk, and stable performance, CLOZ remains a BUY for income investors looking to maximize yield while minimizing interest rate risk.
- Bullish Factors: High income generation, low credit risk, resilience in a volatile rate environment.
- Bearish Risks: Rate cuts could pressure yields, but this is already priced into forecasts.
- Verdict: BUY CLOZ for stable monthly income and long-term yield protection.
For real-time tracking and analysis of NYSEARCA:CLOZ, visit Trading News CLOZ Real-Time Chart.
