Dividend Analysis: Eaton Vance Tax-Managed Buy-Write Income Fund (ETB)
Assessing Dividend Sustainability and Future Prospects
Eaton Vance Tax-Managed Buy-Write Income Fund (NYSE:ETB) recently announced a dividend of $0.09 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-21. As investors eagerly anticipate this upcoming payment, it's essential to examine the company's dividend history, yield, and growth rates. Using data from GuruFocus, let's delve into Eaton Vance Tax-Managed Buy-Write Income Fund's dividend performance and evaluate its sustainability.
Understanding Eaton Vance Tax-Managed Buy-Write Income Fund
Warning! GuruFocus has detected 5 Warning Signs with FTTRF. Click here to check it out.
This Powerful Chart Made Peter Lynch 29% A Year For 13 Years
How to calculate the intrinsic value of a stock?
Eaton Vance Tax-Managed Buy-Write Income Fund is a US-based diversified closed-controlled investment company. The fund aims to provide current income and gains, with a secondary objective of capital appreciation. It invests in a diversified portfolio of common stocks and writes call options on one or more U.S. indices on a substantial portion of the value of its common stock portfolio to generate current earnings from the option premium. Its portfolio of investments spans sectors such as aerospace and defense, banks, biotechnology, chemicals, consumer finance, industrial conglomerates, food, and staples retailing.
Historical Dividend Payments of Eaton Vance Tax-Managed Buy-Write Income Fund
Eaton Vance Tax-Managed Buy-Write Income Fund has upheld a consistent dividend payment record since 2005, currently distributing dividends on a monthly basis. The chart below shows annual Dividends Per Share for tracking historical trends.
Examining Eaton Vance Tax-Managed Buy-Write Income Fund's Dividend Yield and Growth
As of today, Eaton Vance Tax-Managed Buy-Write Income Fund boasts a 12-month trailing dividend yield of 8.84% and a 12-month forward dividend yield of 8.61%. This suggests an expectation of decreased dividend payments over the next 12 months. Over the past three years, the fund's annual dividend growth rate was -0.80%, which increased to -0.30% per year over a five-year horizon.
Based on Eaton Vance Tax-Managed Buy-Write Income Fund's dividend yield and five-year growth rate, the 5-year yield on cost of its stock as of today is approximately 8.71%.
Assessing Dividend Sustainability: Payout Ratio and Profitability
The dividend payout ratio of Eaton Vance Tax-Managed Buy-Write Income Fund, which stands at 0.65 as of 2023-06-30, 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.
The fund's profitability rank of 3 out of 10 suggests that the dividend may not be sustainable, with the company reporting net profit in 4 out of the past 10 years.
Future Outlook: Growth Metrics
A company must have robust growth metrics to ensure the sustainability of dividends. Eaton Vance Tax-Managed Buy-Write Income Fund's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Concluding Remarks
While Eaton Vance Tax-Managed Buy-Write Income Fund has a commendable dividend payment history, its negative growth rate, high payout ratio, and low profitability and growth ranks raise concerns about the sustainability of its dividends. Investors may need to exercise caution and consider these factors while making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
