First Trust High Income Long/Short Fund (FSD): A Dive into Its Dividend Dynamics
Unraveling the Dividend Performance and Sustainability of First Trust High Income Long/Short Fund (NYSE:FSD)
First Trust High Income Long/Short Fund(NYSE:FSD) recently announced a dividend of $0.11 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 High Income Long/Short Funds dividend performance and assess its sustainability.
Introduction to First Trust High Income Long/Short Fund
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.
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.
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 11.75% and a 12-month forward dividend yield of 11.75%. 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 11.46%.
Evaluating Dividend Sustainability
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 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 2023-04-30, suggesting the dividend may not be sustainable. The company has reported net profit in 3 years out of past 10 years.
First Trust High Income Long/Short Fund's Growth Metrics
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.
Conclusion
While First Trust High Income Long/Short Fund has a consistent dividend payment history, its low profitability and growth ranks suggest potential challenges in sustaining the dividends in the long run. The company's payout ratio is also not available, which leaves some uncertainty about the portion of earnings it can allocate towards dividends in the future. Therefore, investors should consider these factors when evaluating the sustainability of First Trust High Income Long/Short Fund's dividends.
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This article first appeared on GuruFocus.
