Carlyle Credit Income Fund Q2 2025 slides: 18.75% dividend yield amid portfolio optimization

Introduction & Market Context

Carlyle Credit Income Fund (NYSE:CCIF) presented its second quarter fiscal year 2025 results on May 21, highlighting the fund’s focus on generating high income through investments in collateralized loan obligation (CLO) equity and junior debt tranches. The fund, managed by global investment firm Carlyle Group (NASDAQ:CG), maintains exposure to 1,428 underlying companies through its diversified CLO portfolio.

Trading at $6.64 as of May 20, 2025, CCIF shares currently offer an 18.75% dividend yield, supported by recurring cash flows from its CLO investments. The fund’s presentation emphasized its ability to generate substantial income while navigating the complexities of the structured credit market.

Quarterly Performance Highlights

For the quarter ended March 31, 2025, CCIF reported net investment income of $0.23 per common share, with adjusted and core net investment income reaching $0.26 and $0.27 per share, respectively. The fund’s net asset value (NAV) stood at $6.98 per share, reflecting a decrease from the $7.64 reported as of September 30, 2024.

The quarterly results demonstrated strong cash generation capabilities, with a 22.67% cash yield on CLO investment payments received during the quarter, translating to $0.49 of recurring cash flows per share.

As shown in the following quarterly results summary:

However, the fund experienced net realized and unrealized losses of $0.40 per share during the quarter, resulting in a net loss of $0.17 per share. Despite these mark-to-market fluctuations, CCIF maintained its monthly dividend at $0.105 per share, declaring distributions for June, July, and August 2025.

The fund’s financial performance over recent quarters shows a consistent focus on income generation:

Portfolio Composition and Strategy

CCIF’s portfolio had a total fair value of $197.9 million (excluding cash) as of March 31, 2025. During the quarter, the fund deployed $30.3 million in new CLO investments with a weighted average GAAP yield of 15.41%, while maintaining a total portfolio weighted average GAAP yield of 16.48%.

A key strategic initiative during the quarter involved completing 13 accretive refinancings and resets in the underlying portfolio, which increased the weighted average remaining CLO reinvestment period from 2.5 years to 3.1 years. This extension provides CLO managers with greater flexibility to manage their portfolios through market cycles.

The fund’s portfolio maintains significant diversification across industries and managers, as illustrated in the following breakdown:

The portfolio demonstrates resilience with a weighted average junior overcollateralization cushion of 4.46%, and no holdings with a cushion below 2.50%. This provides a meaningful buffer against potential credit deterioration in the underlying loan portfolios.

The fund’s detailed portfolio characteristics reveal a defensive positioning with exposure to 1,428 unique underlying loan obligors:

Notably, CCIF’s last 12-month default rate of 1.30% compares favorably to the broader loan market default rate of 3.86%, highlighting the quality of the underlying loan selection by CLO managers in the portfolio.

Dividend Stability and Capital Raising

CCIF has maintained a consistent monthly dividend of $0.105 per share, representing an annualized yield of 18.75% based on recent market prices. The dividend is well-supported by the fund’s core net investment income and recurring cash flows.

The following chart illustrates the fund’s dividend history since inception:

During the quarter, CCIF successfully executed capital raising initiatives, including a private placement of 7.50% convertible preferred shares for approximately $18.6 million and the sale of 1.61 million common shares through its at-the-market (ATM) offering program at a premium to NAV, generating approximately $12.2 million. These capital raises resulted in total NAV accretion of $0.02 per share for the quarter.

Forward-Looking Statements

Looking ahead, CCIF’s management expressed confidence in the fund’s ability to continue generating attractive income from its CLO portfolio. The fund’s strategy of extending reinvestment periods through refinancings and resets positions it to potentially benefit from an eventual interest rate normalization cycle.

The fund’s financial summary provides a comprehensive view of its income generation capabilities and balance sheet strength:

While CLO equity investments can experience mark-to-market volatility, CCIF’s focus remains on the underlying cash flow generation capabilities of these investments. With $0.49 in recurring cash flows supporting the quarterly dividend of $0.315, and approximately $0.62 per share of recurring cash flows projected for Q3 2025, the fund appears well-positioned to maintain its dividend in the near term.

As the broader loan market navigates through economic uncertainties, CCIF’s diversified approach and the expertise of Carlyle’s global credit platform, which manages $199 billion in assets, provide a foundation for the fund’s income-oriented strategy in the quarters ahead.

Full presentation:

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