Priority Income Fund Touts 20.71% Yield Amid Strategic Risk Shift

NEW YORK, NY – December 29, 2025 – Priority Income Fund, Inc. today announced a series of monthly shareholder distributions that translate to a formidable 20.71% annualized rate, a figure certain to capture the attention of income-seeking investors. However, buried beneath the headline-grabbing yield is a significant strategic pivot: a deliberate move toward what the fund deems safer, though potentially less lucrative, investments within the complex world of Collateralized Loan Obligations (CLOs).

In a statement released Monday, the registered closed-end fund declared monthly cash distributions for December 2025, January 2026, and February 2026. The annualized payout of $1.05016 per share is based on the fund’s November 30, 2025 net asset value (NAV) of $5.07 per share. This move continues an impressive streak, marking the 144th, 145th, and 146th consecutive monthly distributions paid to its common stockholders. Yet, the announcement also explicitly linked this distribution to a forward-looking change in its investment allocation, a detail that offers a deeper insight into management’s view of the current market landscape.

A Decade of High-Yield Payouts

For over a decade, Priority Income Fund has been a consistent source of high-yield income for its investors. Since its inception in January 2014, the fund has now paid or declared cumulative cash distributions totaling nearly $17 per common share through February 2026. This long-term record of uninterrupted monthly payments is a cornerstone of its appeal.

However, the annualized distribution rate is not a static figure. Throughout 2025, the announced rates have fluctuated, reflecting the dynamic nature of its underlying assets and market conditions. The fund announced a 13.0% rate in March, which increased to 17.4% in June and 22.0% in September, before reaching a rate as high as 25.87% based on its October NAV. The newly announced 20.71% rate, while still exceptionally high, represents a moderation from the most recent peak. This history of variable, albeit consistently high, payouts underscores the fund's active management in a volatile credit environment.

Investors in such funds must also consider the source of these distributions. While the fund has a history of covering its payouts through net investment income, as noted in past reports, the prospectus always cautions that distributions may include a return of capital. This distinction is crucial for tax purposes and for understanding the true economic return of the investment.

The Strategic Pivot to Safer Ground

The most significant element of the announcement is the fund’s plan to allocate a greater percentage of its new originations into BB-rated debt tranches of CLOs. This marks a tactical shift away from potentially higher-yielding but riskier positions within the CLO capital structure, such as junior debt or equity tranches.

CLOs are securitized pools of corporate loans, sliced into tranches with different levels of risk and return. The lowest-rated equity tranches absorb the first losses from any loan defaults but also receive the highest potential returns. Conversely, higher-rated debt tranches, like the BB-rated securities Priority Income Fund is now targeting, offer more security. While still considered below-investment-grade, these tranches have priority for payment and are better shielded from initial defaults within the loan pool. The fund's management explicitly stated this move is designed to provide “greater downside protection against defaults,” even while acknowledging it may “generate lower cash yields.”

This strategic repositioning suggests a more defensive posture. It implies that the fund's manager, Priority Senior Secured Income Management, LLC, sees potential for increased credit stress or volatility ahead and is proactively adjusting the portfolio to mitigate risk. While the current market default rate for leveraged loans remains below long-term historical averages, a pivot toward higher-quality assets within the CLO structure is a clear signal of prudent risk management.

Navigating an Unlisted Market and Eyeing a Public Future

Understanding Priority Income Fund’s current structure is key to interpreting its announcements. The fund's common shares are not currently traded on a public stock exchange. Consequently, there is no daily market price, and metrics like a premium or discount to NAV are not applicable in the traditional sense. For existing investors, liquidity is limited to periodic tender offers, where the fund repurchases a small percentage of its shares at a price based on NAV. This makes the NAV-based distribution rate of 20.71% the most relevant performance metric.

This context makes the fund’s future plans all the more interesting. In April 2025, Priority Income Fund announced its intention to seek a public listing on the Nasdaq, with a target of the first half of 2026. This planned transition from an unlisted, non-traded fund to a publicly accessible one provides a potential motive for the strategic shift. De-risking the portfolio by moving into more secure BB-rated CLO tranches could be a strategic move to make the fund more appealing to a broader base of public market investors and analysts who may prioritize stability alongside high yield.

Publicly traded peers in the CLO fund space, such as Oxford Lane Capital and Eagle Point Credit Company, often trade at significant premiums to their NAV. By building a more resilient portfolio ahead of its own potential listing, Priority Income Fund may be positioning itself to achieve a similarly favorable market valuation once it begins trading. The shift towards greater credit quality, therefore, can be viewed not just as a defensive maneuver but as a strategic preparation for its next chapter as a publicly listed entity.