First Trust Energy Infrastructure Fund's Dividend Analysis
Assessing the Sustainability of FIF's Dividend Payments
First Trust Energy Infrastructure Fund (NYSE:FIF) recently announced a dividend of $0.10 per share, payable on January 16, 2024, with the ex-dividend date set for January 2, 2024. 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 Energy Infrastructure Fund's dividend performance and assess its sustainability.
What Does First Trust Energy Infrastructure Fund Do?
This Powerful Chart Made Peter Lynch 29% A Year For 13 Years
How to calculate the intrinsic value of a stock?
First Trust Energy Infrastructure Fund is a closed-end management investment company. The fund's investment objective is to seek a high level of total return with an emphasis on current distributions paid to shareholders. It seeks to invest in stocks of companies operating in the energy infrastructure sector, including pipeline companies, utilities, and other companies that derive a majority of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission, and petroleum and natural gas storage in the petroleum, natural gas, and power generation industries. Geographically, all the operations function through the United States of America.
A Glimpse at First Trust Energy Infrastructure Fund's Dividend History
First Trust Energy Infrastructure Fund has maintained a consistent dividend payment record since 2011. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down First Trust Energy Infrastructure Fund's Dividend Yield and Growth
As of today, First Trust Energy Infrastructure Fund currently has a 12-month trailing dividend yield of 6.65% and a 12-month forward dividend yield of 7.29%. This suggests an expectation of an increase in dividend payments over the next 12 months.
Over the past three years, First Trust Energy Infrastructure Fund's annual dividend growth rate was -17.10%. Extended to a five-year horizon, this rate increased to -12.90% per year. Based on First Trust Energy Infrastructure Fund's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust Energy Infrastructure Fund stock as of today is approximately 3.34%.
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 May 31, 2023, First Trust Energy Infrastructure Fund's dividend payout ratio is 0.00.
First Trust Energy Infrastructure Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust Energy Infrastructure Fund's profitability 2 out of 10 as of May 31, 2023, 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 Energy Infrastructure 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.
Revenue is the lifeblood of any company, and First Trust Energy Infrastructure Fund's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. First Trust Energy Infrastructure Fund's revenue has increased by approximately 40.90% per year on average, a rate that outperforms approximately 84% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, First Trust Energy Infrastructure Fund's earnings increased by approximately 41.70% per year on average, a rate that outperforms approximately 82.69% of global competitors.
Next Steps
Considering First Trust Energy Infrastructure Fund's consistent dividend payments, investors should weigh the negative dividend growth rate and low profitability and growth ranks against the strong revenue and earnings growth. These conflicting signals suggest that while the company has been able to increase its revenue and earnings, its overall financial health may not fully support a growing dividend strategy in the long term. Value investors may want to keep an eye on the fund's future earnings reports and strategic initiatives to better understand its dividend sustainability. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
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.
This article first appeared on GuruFocus.
