XOMA Royalty: Preferreds Still Offer Compelling Income Despite Call Risk
•February 11, 2026
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Companies Mentioned
Why It Matters
The preferred’s strong yield and growing royalty pipeline provide a rare blend of biotech upside and reliable cash flow, appealing to income‑focused investors in a low‑rate environment.
Key Takeaways
- •XOMAO offers 8.3% cumulative preferred yield.
- •New 24 royalty assets added in 2025.
- •Section 174 tax attributes may boost after‑tax cash.
- •Dividend durability hinges on XOMA’s balance sheet health.
- •Preferreds carry call risk but remain income‑focused.
Pulse Analysis
XOMA Royalty Corporation operates a niche business model that monetizes royalty streams, milestone payments, and licensing fees from biotech and pharmaceutical partners. By aggregating these rights, XOMA creates a diversified, non‑dilutive cash‑flow engine that is largely insulated from the volatility of any single drug development program. This structure not only offers investors exposure to the high‑growth biotech sector but also generates predictable revenue that underpins its preferred dividend.
The 8.375% cumulative preferred, listed as XOMAO, delivers an 8.3% yield—significantly above average preferred rates in the current market. While the security carries call risk, its dividend durability is anchored by XOMA’s robust balance sheet and the steady inflow of royalty payments. Analysts view the preferred’s yield as sustainable provided the company maintains its asset acquisition pace and manages payout obligations. The cumulative feature further protects investors by accruing unpaid dividends, enhancing the instrument’s appeal during periods of market stress.
Looking ahead, XOMA’s addition of 24 new royalty assets in 2025 expands its income base and diversifies exposure across multiple therapeutic areas. Moreover, the firm stands to benefit from Section 174 tax attributes, which could improve after‑tax cash generation as the tax code evolves. For income‑oriented investors, XOMAO presents a compelling blend of high yield, biotech sector upside, and a growing asset portfolio, making it a noteworthy candidate in a portfolio seeking stable returns amid low‑interest‑rate conditions.
XOMA Royalty: Preferreds Still Offer Compelling Income Despite Call Risk
Summary
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XOMAO is XOMA Royalty Corporation’s 8.375 % cumulative preferred. I believe the core thesis centers on their dividend durability at this point.
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In my view, this means that as long as XOMA keeps a healthy balance sheet and its yield remains compelling, then XOMAO looks like a viable dividend play.
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In that sense, XOMA added 24 assets in 2025. They continue aggregating royalty interests, corporate deals, and contracts.
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I also like how they’re positioning to benefit from longer‑term Section 174 tax attributes that could further improve XOMA’s after‑tax cash over time.
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That’s why XOMAO remains a compelling income vehicle at its 8.3 % yield that also offers some exposure to biotech.
Douglas Rissing/iStock via Getty Images
XOMA Royalty Corporation (XOMA) (XOMAO) accumulates financial income from royalties, milestones, and other fees. They receive those cash inflows from programs run by other biotechs or pharmaceutical firms. However, note that XOMAO is not the common stock.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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