Published on October 17th, 2025 by Felix Martinez
High-yield stocks with dividend yields exceeding 5% are particularly appealing to income investors. However, not all high dividend stocks are created equal.
Some companies offer secure dividend payouts, but others are in a questionable financial condition, leaving shareholders vulnerable to a dividend cut in a downturn.
With this in mind, we compiled a comprehensive list of high-dividend stocks.
Ellington Residential Mortgage REIT (EARN) is part of our ‘High Dividend 50’ series, where we cover the 50 highest-yielding stocks in the Sure Analysis Research Database.
You can download your free full list of all high dividend stocks with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:
In this article, we will analyze the prospects of Ellington Residential Mortgage.
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 with a market capitalization of ~$229 million. 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 strong first-quarter fiscal 2025 results on June 30th, 2025, achieving GAAP net income of $10.2 million ($0.27 per share) and net investment income (NII) of $6.5 million ($0.17 per share). Adjusted NII came in slightly higher at $6.6 million ($0.18 per share). The firm’s net asset value (NAV) rose modestly to $6.12 per share, despite paying $0.24 in quarterly distributions. Ellington’s CLO portfolio expanded 27% sequentially to $316.9 million, driven by opportunistic purchases during market volatility in April. CLO debt holdings increased to $148.9 million, while equity positions rose to $168.0 million. The portfolio delivered a 15.6% weighted average GAAP yield, and recurring cash distributions totaled $15.9 million ($0.42 per share). The company’s annualized return for the quarter reached an impressive 19.7%, fueled by strong performance in both CLO equity and mezzanine debt tranches.
Management highlighted that the quarter marked Ellington’s first as a registered closed-end fund, with a full exit from legacy mortgage investments and redeployment of capital into high-conviction CLO opportunities. The firm took advantage of April’s market dislocation to buy discounted assets, then added hedges as credit spreads tightened later in the quarter. CEO Laurence Penn noted that while NII temporarily lagged during the capital rotation, ample liquidity and an uninvested capital position position the company for higher income in the second half of 2025. Looking ahead, Ellington expects monthly NII to fully cover its $0.08 dividend starting in September, supported by a 15% portfolio yield, disciplined leverage, and ongoing CLO market strength. The company remains focused on scaling its CLO platform and maintaining an attractive distribution yield of 17.2%. Management is confident that its active trading strategy and robust credit selection will sustain strong returns amid evolving market conditions.
Source: Investor Presentation
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 maintained a consistent share count, but following 2016, the number of shares outstanding has increased, which could become another barrier to growing earnings on a per-share basis.
In April 2024, Ellington Credit began the refocusing and rotation of 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, along with its poor track record of earnings growth, we expect EPS growth of 6% per year over the next five years.
Source: Investor Presentation
Competitive Advantages
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. Additionally, approximately 20% of the company’s employees are dedicated to research and information technology.
While the company’s details were not public during the 2008 real estate crash, a recession of that magnitude would most definitely have affected EARN.
Its focus on government-sponsored MBS provides some safety, but a prolonged recession in the future would likely affect EARN’s bottom line and result in further dividend reductions.
Dividend Analysis
The dividend has been cut nearly every year in its history, with an increase in 2021, followed by a modification to the dividend schedule from quarterly to monthly, which may be appreciated by some shareholders.
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 remains under heavy pressure.
Still, at a level of $0.96 per share, EARN stock yields 18%+. Therefore, EARN stock remains attractive for income investors as a high-dividend stock.
However, EARN’s dividend is far from trustworthy, given the corporation’s history of cuts in the past. The dividend payout ratio is expected at 104% for 2025.
Any time a company’s dividend payout ratio exceeds 100%, it is a red flag, as it indicates that the company is paying out more than it earns through its 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 terms of core earnings per share and dividend payments. In fact, EARN slashed its dividend for six consecutive years, leading up to 2021 and then 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 abysmally poor dividend history. Furthermore, its dividend is still not on solid footing, leaving it open to even further potential dividend cuts.
If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:
High-Yield Individual Security Research
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Super High Dividend REITs
- 5 Highest Yielding Royalty Trusts
Other Sure Dividend Resources
- Dividend Champions: 25+ years of rising dividends
- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Kings: 50+ years of rising dividends
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- Monthly Dividend Stocks: Individual securities that pay out every month
- MLP List
- REIT List
- BDC List