First Trust High Income Long/Short Fund's Dividend Analysis
Assessing the Sustainability of First Trust High Income Long/Short Fund's Dividend
First Trust High Income Long/Short Fund (NYSE:FSD) recently announced a dividend of $0.11 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 High Income Long/Short Fund's dividend performance and assess its sustainability.
What Does First Trust High Income Long/Short Fund Do?
First Trust High Income Long/Short Fund is a diversified, closed-end management investment company based in the United States. The fund's aim is to provide a high current income to its investors. Its secondary objective is capital appreciation. It seeks to achieve its objectives by investing in a diversified portfolio in the United States. The fund holds an interest in various sectors, such as basic industry, healthcare, capital goods, telecommunications, automotive, banking, media, energy, leisure, insurance, technology and electronics, transportation, and financial services.
A Glimpse at First Trust High Income Long/Short Fund's Dividend History
First Trust High Income Long/Short Fund has maintained a consistent dividend payment record since 2010. 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 High Income Long/Short Fund's Dividend Yield and Growth
As of today, First Trust High Income Long/Short Fund currently has a 12-month trailing dividend yield of 10.42% and a 12-month forward dividend yield of 10.42%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, First Trust High Income Long/Short Fund's annual dividend growth rate was -0.50%. Extended to a five-year horizon, this rate stayed the same. Based on First Trust High Income Long/Short Fund's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust High Income Long/Short Fund stock as of today is approximately 10.14%.
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 April 30, 2023, First Trust High Income Long/Short Fund's dividend payout ratio is 0.00.
First Trust High Income Long/Short Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust High Income Long/Short Fund's profitability 2 out of 10 as of April 30, 2023, suggesting 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 High Income Long/Short 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 for Investors
In conclusion, while First Trust High Income Long/Short Fund offers a high dividend yield, the sustainability of its dividends remains in question due to a low profitability rank and poor growth prospects. Investors should consider these factors alongside the fund's consistent dividend history when evaluating the investment. For those seeking high-dividend yield opportunities, GuruFocus Premium users can screen for 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.
