A Comprehensive Analysis of MFM's Dividend Performance and Sustainability
MFS Municipal Income Trust (MFM, Financial) recently announced a dividend of $0.02 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-12. As investors eagerly anticipate this forthcoming payment, the company's dividend history, yield, and growth rates also deserve attention. Using the data from GuruFocus, we delve into MFS Municipal Income Trust's dividend performance and evaluate its sustainability.
What Does MFS Municipal Income Trust Do?
MFS Municipal Income Trust is a diversified closed-end management investment company. Its primary objective is to seek high current income exempt from federal income tax, with capital appreciation being a secondary consideration. The fund predominantly invests its net assets, including assets attributable to preferred shares and borrowings for investment purposes, in municipal bonds.
A Glimpse at MFS Municipal Income Trust's Dividend History
MFS Municipal Income Trust has maintained a consistent dividend payment record since 1988. Dividends are currently distributed on a monthly basis. Here is a chart showcasing annual Dividends Per Share for tracking historical trends.
Breaking Down MFS Municipal Income Trust's Dividend Yield and Growth
As of the present, MFS Municipal Income Trust boasts a 12-month trailing dividend yield of 4.52% and a 12-month forward dividend yield of 4.48%. This implies a projected decrease in dividend payments over the next 12 months.
Over the past three years, MFS Municipal Income Trust's annual dividend growth rate was -8.70%. When extended to a five-year horizon, this rate increased to -7.30% per year. Based on MFS Municipal Income Trust's dividend yield and five-year growth rate, the 5-year yield on cost of MFS Municipal Income Trust stock as of today is approximately 3.09%.
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 2023-04-30, MFS Municipal Income Trust's dividend payout ratio is 0.00.
MFS Municipal Income Trust's profitability rank, offering an understanding of the company's earnings prowess relative to its peers, is 2 out of 10 as of 2023-04-30, suggesting that 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. MFS Municipal Income Trust'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
In conclusion, while MFS Municipal Income Trust has a history of consistent dividend payments, its negative dividend growth rate, zero payout ratio, low profitability, and poor growth metrics raise concerns about the sustainability of its dividends. Investors should consider these factors carefully before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
