Examining FCT's Dividend History, Yield, Growth, and Future Outlook
First Trust Senior Floating Rate Income Fund II (FCT, Financial) recently announced a dividend of $0.1 per share, payable on 2023-10-16, with the ex-dividend date set for 2023-10-02. 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 deep dive into First Trust Senior Floating Rate Income Fund II's dividend performance and assess its sustainability.
What Does First Trust Senior Floating Rate Income Fund II Do?
First Trust Senior Floating Rate Income Fund II is a United States based diversified, closed-end management investment company. Its primary investment objective is to seek a high level of current income. Additionally, the fund aims to preserve capital as a secondary objective. The fund seeks to achieve these objectives by primarily investing in a portfolio of senior floating-rate loan interests. Its portfolio of investments spans across sectors such as aerospace and defense, agricultural products, broadcasting, cable and satellite, and electric utilities.
A Glimpse at First Trust Senior Floating Rate Income Fund II's Dividend History
First Trust Senior Floating Rate Income Fund II has maintained a consistent dividend payment record since 2004, with dividends currently distributed on a monthly basis. The chart below shows the annual Dividends Per Share for tracking historical trends.
Breaking Down First Trust Senior Floating Rate Income Fund II's Dividend Yield and Growth
As of today, First Trust Senior Floating Rate Income Fund II currently has a 12-month trailing dividend yield of 9.89% and a 12-month forward dividend yield of 11.64%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, First Trust Senior Floating Rate Income Fund II's annual dividend growth rate was -2.30%. However, extending to a five-year horizon, this rate increased to 5.70% per year. Based on First Trust Senior Floating Rate Income Fund II's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust Senior Floating Rate Income Fund II stock as of today is approximately 13.04%.
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 2023-05-31, First Trust Senior Floating Rate Income Fund II's dividend payout ratio is 1.66, which may suggest that the company's dividend may not be sustainable.
First Trust Senior Floating Rate Income Fund II's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust Senior Floating Rate Income Fund II's profitability 2 out of 10 as of 2023-05-31, suggesting the dividend may not be sustainable. The company has reported net profit in 4 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 Senior Floating Rate Income Fund II'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
Given First Trust Senior Floating Rate Income Fund II's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors need to carefully consider the sustainability of the company's dividends. While the company offers an attractive yield, its payout ratio and growth rank raise concerns about the sustainability of its dividends in the long term. Investors should continue to monitor these factors closely.
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