Delving into the Sustainability of First Trust Inter Dur Pref& Income Fund's Dividend
First Trust Inter Dur Pref& Income Fund (NYSE:FPF) recently announced a dividend of $0.14 per share, payable on 2023-12-15, with the ex-dividend date set for 2023-12-01. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into First Trust Inter Dur Pref& Income Fund's dividend performance and assess its sustainability.
What Does First Trust Inter Dur Pref& Income Fund Do?
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First Trust Inter Dur Pref& Income Fund is a diversified, closed-end management investment company. Its primary investment objective is to seek a high level of current income. Further, it has a secondary objective of capital appreciation. The Fund invests in the traditional preferred securities, hybrid preferred securities, floating rate & fixed-to-floating rate preferred securities, debt securities, convertible securities, and contingent convertible securities issued by U.S. and non-U.S. companies. Its investment portfolio includes industries such as Banks, Insurance, Capital Markets, Electric Utilities, Oil, Gas & Consumable Fuels, Food Products, and others.
First Trust Inter Dur Pref& Income Fund's Dividend Analysis
A Glimpse at First Trust Inter Dur Pref& Income Fund's Dividend History
First Trust Inter Dur Pref& Income Fund has maintained a consistent dividend payment record since 2016. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
First Trust Inter Dur Pref& Income Fund's Dividend Analysis
Breaking Down First Trust Inter Dur Pref& Income Fund's Dividend Yield and Growth
As of today, First Trust Inter Dur Pref& Income Fund currently has a 12-month trailing dividend yield of 8.26% and a 12-month forward dividend yield of 10.45%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, First Trust Inter Dur Pref& Income Fund's annual dividend growth rate was -4.20%. Extended to a five-year horizon, this rate increased to 15.60% per year. Based on First Trust Inter Dur Pref& Income Fund's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust Inter Dur Pref& Income Fund stock as of today is approximately 17.05%.
First Trust Inter Dur Pref& Income Fund's Dividend Analysis
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-04-30, First Trust Inter Dur Pref& Income Fund's dividend payout ratio is 0.00, which may raise concerns about the sustainability of the dividend. First Trust Inter Dur Pref& Income Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust Inter Dur Pref& Income Fund's profitability 2 out of 10 as of 2023-04-30, suggesting that the dividend may not be sustainable. The company has reported net profit in 3 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. First Trust Inter Dur Pref& Income Fund's growth rank of 2 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Next Steps
In conclusion, while First Trust Inter Dur Pref& Income Fund offers an attractive dividend yield and has shown impressive five-year growth rates, the sustainability of its dividends is uncertain. The low profitability and growth ranks, coupled with a dividend payout ratio of 0.00, may indicate potential challenges in maintaining its dividend payments. Investors should conduct thorough due diligence and consider the company's long-term growth prospects, financial health, and market conditions before making investment decisions. For those seeking to diversify their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener as a valuable tool.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
