Oxford Lane Capital (OXLC) Stock

OXLC's operating cash flow profile has worsened and equity raises continue. I am skeptical about the above-NAV raise, below-par CLO investment strategy as investment fair values are still below cost. Long term, OXLC returns have been poor; eroding 11% of NAV value and 4% of dividends value every year from 2011 - 2024. OXLC's NAV is steady over the past few quarters but OXLC is trading at a premium to it, which makes it difficult for me to have a constructive view.

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Oxford Lane Capital Corporation focuses on CLOs, offering high yields but with significant risks. OXLC's 20% yield is a major selling point, supported by strong cash flow and a sustainable leverage ratio around 24%. The fund's premium has recently decreased, presenting a potential entry point, though it remains volatile and sensitive to market corrections.

I prefer investments higher up in the capital stack of CLOs, favoring Oxford Lane Capital's term preferred shares over common units. OXLC's net investment income of $123.1M in the first half of the year demonstrates robust cash flow, supporting its financial stability. The strategy of issuing new common shares enhances the asset coverage ratio, making the balance sheet safer and fixed income securities more appealing.

Oxford Lane Capital Corporation offers a high dividend yield of 21%, but trades above net asset value and has an unconvincing total return track record. Previous analysis rated Oxford Lane Capital Corporation as neutral due to weak price appreciation potential, which has been validated by its underperformance compared to the broader market. The fund is not well-positioned for a potential recession, with investments that are not recession-resistant and recent economic indicators suggesting potential downturn risks.

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OXLC offers a high 19% yield generated from investing in lower tranches of CLOs. This payout appears 'safe', as distributions are significantly below core investment income. That said, OXLC has materially underperformed the S&P 500 since inception and experienced significant volatility, making it a sub-par investment for risk-adjusted returns. Long-term investors relying on OXLC's income will likely face declining payouts and falling principal value over time.

Oxford Lane Capital (OXLC) stock has risen modestly this year and is hovering near its all-time high of $5.35. It has risen by 6% this year, and thanks to its fast 20% yield, its total return has been 24%, higher than the Vanguard S&P 500 index (VOO).

GREENWICH, Conn., Oct. 25, 2024 (GLOBE NEWSWIRE) -- Oxford Lane Capital Corp. (Nasdaq: OXLC) (NasdaqGS: OXLCP) (NasdaqGS: OXLCL) (NasdaqGS: OXLCO) (NasdaqGS: OXLCZ) (NasdaqGS: OXLCN) (NasdaqGS: OXLCI) announced today that it will hold a conference call to discuss its second fiscal quarter earnings on Friday, November 1, 2024 at 9:00 AM ET. The toll-free dial-in number is 1-833-470-1428, access code number 436588. There will be a recorded replay of the call available for 30 days after the call. If you are interested in hearing the recording, please dial 1-866-813-9403. The replay pass-code number is 813197.