A comprehensive assessment of First Trust Mortgage Income Fund's dividend performance and sustainability
First Trust Mortgage Income Fund(NYSE:FMY) recently announced a dividend of $0.07 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 Mortgage Income Fund's dividend performance and assess its sustainability.
Introduction to First Trust Mortgage Income Fund
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First Trust Mortgage Income Fund is a United States based diversified, closed-end management investment company. The fund's primary investment objective is to seek a high level of current income. Its secondary investment objective is to preserve capital. The fund pursues its objectives by investing primarily in mortgage-backed securities.
First Trust Mortgage Income Fund's Dividend History
First Trust Mortgage Income Fund has maintained a consistent dividend payment record since 2005. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
First Trust Mortgage Income Fund's Dividend Yield and Growth
As of today, First Trust Mortgage Income Fund currently has a 12-month trailing dividend yield of 5.98% and a 12-month forward dividend yield of 6.09%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, First Trust Mortgage Income Fund's annual dividend growth rate was -2.90%. Extended to a five-year horizon, this rate increased to -2.70% per year. Based on First Trust Mortgage Income Fund's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust Mortgage Income Fund stock as of today is approximately 5.15%.
Is First Trust Mortgage Income Fund's Dividend Sustainable?
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 Mortgage Income Fund's dividend payout ratio is 5.08, which may suggest that the company's dividend may not be sustainable.
First Trust Mortgage Income Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust Mortgage Income 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 5 years out of past 10 years.
First Trust Mortgage Income Fund's Growth Metrics
To ensure the sustainability of dividends, a company must have robust growth metrics. First Trust Mortgage Income 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.
Considering the analysis of First Trust Mortgage Income Fund's dividend payments, growth rate, payout ratio, profitability, and growth metrics, investors need to exercise caution. The company's low profitability and growth rank may suggest that the dividends may not be sustainable in the long run. Therefore, it's crucial for investors to closely monitor these metrics for any potential changes.
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This article first appeared on GuruFocus.