Chicago, IL – October 1, 2025 – XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) today announced its latest distributions, declaring its monthly common shares distribution and quarterly preferred shares dividend. This announcement, made on the current date of October 1, 2025, signals the Trust's continued commitment to providing income to its shareholders, with ex-dividend and payment dates scheduled for later in October and early November.

The consistent declaration of distributions by XFLT comes at a pivotal time for income-focused investors, as the financial markets navigate a complex landscape of normalizing interest rates and a sustained search for yield. The Trust's ability to maintain its payout levels offers a degree of predictability for shareholders, positioning it as a key player in the closed-end fund (CEF) space, particularly for those seeking exposure to floating-rate credit and alternative income streams.

Detailed Coverage: XFLT's Consistent Payouts in Focus

XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) has declared a monthly distribution of $0.070 per common share, maintaining its payout at the same level as previous months. For the Trust's 6.50% Series 2026 Term Preferred Shares (NYSE: XFLTPRA), a quarterly dividend of $0.40625 per share was also declared, similarly holding steady.

The common share distribution will have an ex-dividend date of October 15, 2025, a record date of October 15, 2025, and a payment date of November 3, 2025. The preferred share dividend shares the same ex-dividend and record dates of October 15, 2025, with a payment date of October 31, 2025. These dates confirm that the distributions are forthcoming, and the announcement aligns with the Trust's established schedule.

XFLT operates as a diversified, closed-end management investment company, advised by XA Investments LLC and sub-advised by Octagon Credit Investors, LLC. Its core investment objective is to generate attractive total returns with a strong emphasis on income, primarily by investing in private credit markets. The Trust allocates at least 80% of its managed assets to floating-rate credit instruments, such as senior secured floating-rate loans, and structured credit investments, including Collateralized Loan Obligation (CLO) debt and equity. This strategy is particularly designed to perform in rising or sustained higher interest rate environments, as floating rates adjust upwards, offering a hedge against the price depreciation faced by fixed-rate bonds.

Historically, XFLT has demonstrated a pattern of consistent monthly common share distributions, often at the $0.070 per share level. This current declaration reinforces that pattern, indicating stability in its distribution policy. While distributions are primarily intended to be paid from net investment income, they may also be sourced from capital gains or, in some cases, a return of capital. For the fiscal year ended 2023, the Trust reported that 100% of its distributions were from net income, a positive indicator of sustainability.

The general sentiment surrounding floating-rate and alternative income funds in 2024-2025 is broadly optimistic. Investors are increasingly seeking resilient income generation and diversification, leading to increased allocations to private credit. This segment is viewed favorably for its potential to offer stability and predictable returns, especially when interest rates are expected to remain elevated. However, macroeconomic uncertainties and geopolitical instability continue to pose potential challenges, emphasizing the importance of active management and careful portfolio construction within these funds.

Company Impact: Stability for XFLT Shareholders

The declaration of consistent monthly distributions and quarterly dividends is a significant positive for shareholders of XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) and its preferred shares (NYSE: XFLTPRA). For income-seeking investors, the predictability of these payouts provides a stable cash flow, a crucial element in building a robust income-generating portfolio, particularly in an environment where reliable yield is highly valued.

Maintaining the distribution and dividend amounts signals the management's confidence in the Trust's underlying portfolio performance and its ability to generate sufficient income. XFLT's investment strategy, heavily focused on floating-rate credit instruments and CLOs, is inherently designed to benefit from higher interest rates. In an environment where rates have normalized and long-term yields remain attractive, the fund is positioned to capture income that might be elusive in other fixed-income segments.

However, the impact is not without its nuances. While consistent payouts are desirable, investors must remain vigilant about the source of these distributions. A sustained reliance on "return of capital" could, over time, erode the fund's Net Asset Value (NAV), potentially undermining long-term total returns. XFLT's reported 100% net income coverage in 2023 is reassuring, but ongoing monitoring of financial reports for distribution coverage is essential.

Furthermore, the high expense ratio of XFLT (4.24%) and its use of leverage (up to 40% of managed assets) are factors that can amplify both gains and losses. While leverage can enhance distributions, it also increases volatility and risk. Therefore, while the current declarations are positive, shareholders should consider these structural aspects when assessing the fund's long-term prospects. For now, the stability in payouts offers a clear benefit to those invested in XFLT for its income-generating potential.

Wider Significance: CEFs in a Yield-Hungry Market

The consistent distribution declarations by XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) resonate broadly across the financial markets, particularly within the landscape of income-generating investments and the specialized role of Closed-End Funds (CEFs). In a 2025 market characterized by normalizing interest rates and a persistent search for yield, CEFs like XFLT are becoming increasingly prominent.

This event underscores a broader trend where investors are actively seeking diversified income streams beyond traditional fixed-income instruments. With the U.S. Federal Reserve potentially embarking on gradual rate cuts through 2025, but long-term yields remaining elevated, the appeal of assets that can generate consistent cash flow is heightened. CEFs, with their ability to utilize leverage and invest in less liquid, higher-yielding assets like private credit, offer a unique value proposition.

The role of CEFs is distinct due to their fixed capital structure. Unlike open-end funds, CEFs do not face redemption pressures, allowing managers to remain fully invested and pursue long-term strategies without liquidity concerns. This structure often enables them to target higher distribution rates, a key attraction for income-focused investors. However, this also means their market price can deviate significantly from their Net Asset Value (NAV), creating opportunities or risks depending on whether they trade at a discount or premium.

Regulatory considerations also play a crucial role. CEFs are governed by the Investment Company Act of 1940 and subject to SEC oversight, ensuring transparency and investor protection. A notable development in August 2025 (SEC ADI 2025-16) updated guidance for retail CEFs investing in private funds, removing previous limitations on private fund exposure and minimum investment requirements. This regulatory shift is poised to facilitate broader retail investor access to private investment strategies through CEFs, potentially increasing the demand for funds like XFLT.

The current interest rate environment (October 1, 2025) is particularly impactful. For floating-rate funds like XFLT, sustained higher rates generally translate to increased income generation. However, a potential scenario of rapidly falling rates could reduce net investment income, while rapidly rising rates might increase borrower default risks. The balance between these factors will dictate the ongoing appeal and performance of such funds. The consistent distribution from XFLT, therefore, serves as a bellwether for the health and attractiveness of the floating-rate and alternative income segments within the broader CEF market.

What Comes Next: Navigating XFLT's Future Trajectory

Following its latest distribution and dividend declarations, XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) faces a dynamic short-term and long-term outlook, influenced by both internal performance metrics and external market forces. Investors will need to closely monitor several key indicators to assess the Trust's future trajectory.

In the short term, technical indicators for XFLT present a mixed picture. While a recent buy signal emerged from a pivot bottom, suggesting some immediate positive momentum, the stock also carries sell signals from its short and long-term Moving Averages. Analyst projections indicate a potential modest decline of around 4.03% over the next three months, with the price likely to stay within a range of $5.03 to $5.43. A significant increase in short interest (232.98%) also reflects a bearish sentiment among some short-term traders, which could contribute to price volatility.

Looking further ahead, the long-term outlook for XFLT is subject to more varied interpretations. Some fundamental analyses point to potential undervaluation, citing a low P/E ratio and consistent revenue growth. However, concerns persist regarding the sustainability of distributions, particularly if they consistently outpace net investment income, leading to Net Asset Value (NAV) dilution. The high expense ratio and the fund's concentration in CLO equity and debt, while offering income potential, may not deliver exceptionally high long-term returns compared to other asset classes. A previous monthly distribution cut in June 2025, attributed to market volatility and interest rate spread compression, serves as a reminder of potential adjustments.

Several critical factors will influence XFLT's future distributions and share price:

• Interest Rate Environment: The trajectory of interest rates will be paramount. While floating-rate assets benefit from higher rates, sustained high rates could increase default risks for underlying borrowers. Conversely, a significant drop in rates would likely reduce XFLT's net investment income, potentially impacting distributions.
• Credit Quality and Borrower Defaults: The health of the broader economy and corporate credit markets directly impacts the credit quality of XFLT's portfolio. An uptick in defaults within leveraged loans and CLOs would negatively affect the fund's earnings and NAV.
• Distribution Coverage and Source: Investors must scrutinize the source of XFLT's distributions. A consistent or increasing reliance on return of capital, especially if NAV is declining, could signal long-term sustainability issues.
• Net Asset Value (NAV) Performance: A declining NAV indicates capital erosion, which directly pressures the share price and the long-term viability of distributions.
• Market Sentiment and Valuation: General investor sentiment towards high-yield credit and XFLT's trading discount or premium to NAV will continue to influence its market price.

Comprehensive Wrap-Up: Navigating Income in an Evolving Market

The latest distribution and dividend declarations by XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) underscore its role as a consistent income provider in the closed-end fund (CEF) universe. In a financial climate marked by normalizing interest rates and an ongoing quest for yield, XFLT's adherence to its established payout levels offers a measure of stability for shareholders.

Key takeaways from this event highlight the enduring appeal of floating-rate and alternative income strategies, particularly as investors seek diversification and resilient income streams. XFLT's investment in senior secured floating-rate loans and CLOs positions it to capitalize on environments where interest rates are stable or rising. The recent SEC guidance facilitating retail access to private investment strategies through CEFs further boasts the potential for funds like XFLT to attract broader investor interest.

However, investors must approach XFLT with a nuanced understanding. While consistent distributions are attractive, the sustainability of these payouts, particularly the proportion derived from net investment income versus return of capital, remains a critical factor. The fund's high expense ratio and reliance on leverage, while potentially enhancing yield, also introduce additional layers of risk and volatility.

Moving forward, investors should diligently monitor XFLT's Net Asset Value (NAV) performance, the composition of its distributions, and the broader trends in interest rates and credit markets. Changes in global economic conditions, corporate default rates, and the fund's ability to effectively manage its leveraged portfolio will all play a significant role in its future performance and the stability of its income stream. The market's assessment of XFLT's valuation relative to its NAV, alongside management's commentary, will provide crucial insights into its long-term health. Vigilance in these areas will be key for investors seeking to navigate the opportunities and challenges presented by this unique income-generating vehicle in the coming months and years.

This content is intended for informational purposes only and is not financial advice.