Assessing the Sustainability of PFLT's Upcoming Dividend
PennantPark Floating Rate Capital Ltd (PFLT, Financial) recently announced a dividend of $0.10 per share, payable on February 1, 2024, with the ex-dividend date set for January 12, 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 PennantPark Floating Rate Capital Ltd's dividend performance and assess its sustainability.
What Does PennantPark Floating Rate Capital Ltd Do?
PennantPark Floating Rate Capital Ltd is a closed-end, externally managed, non-diversified investment company. Its investment objectives are to generate current income and capital appreciation by investing in Floating Rate Loans and other investments made to U.S. middle-market companies. The company believes that Floating Rate Loans to U.S. middle-market companies offer attractive risk-reward to investors due to the limited amount of capital available for such companies and the potential for rising interest rates. The company generates revenue in the form of interest income on the debt securities and dividends.
A Glimpse at PennantPark Floating Rate Capital Ltd's Dividend History
PennantPark Floating Rate Capital Ltd has maintained a consistent dividend payment record since 2011, with dividends currently distributed on a monthly basis. The company has increased its dividend each year since 2012, earning the status of a dividend achiever, a prestigious recognition for companies that have consistently increased their dividend for at least the past 12 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down PennantPark Floating Rate Capital Ltd's Dividend Yield and Growth
As of today, PennantPark Floating Rate Capital Ltd currently has a 12-month trailing dividend yield of 9.96% and a 12-month forward dividend yield of 10.16%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, PennantPark Floating Rate Capital Ltd's annual dividend growth rate was 1.30%. Extended to a five-year horizon, this rate decreased to 0.60% per year. And over the past decade, PennantPark Floating Rate Capital Ltd's annual dividends per share growth rate stands at 0.90%. Based on PennantPark Floating Rate Capital Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of PennantPark Floating Rate Capital Ltd stock as of today is approximately 10.26%.
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 September 30, 2023, PennantPark Floating Rate Capital Ltd's dividend payout ratio is 1.54, which may suggest that the company's dividend may not be sustainable.
PennantPark Floating Rate Capital Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks PennantPark Floating Rate Capital Ltd's profitability 5 out of 10 as of September 30, 2023, suggesting fair profitability. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. PennantPark Floating Rate Capital Ltd's growth rank of 5 out of 10 suggests that the company has a fair growth outlook. Revenue is the lifeblood of any company, and PennantPark Floating Rate Capital Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. PennantPark Floating Rate Capital Ltd's revenue has increased by approximately 12.30% per year on average, a rate that outperforms approximately 59.5% 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, PennantPark Floating Rate Capital Ltd's earnings increased by approximately 17.90% per year on average, a rate that outperforms approximately 61.29% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -9.10%, which outperforms approximately 16.67% of global competitors, presents a mixed picture but still indicates potential areas of strength.
Conclusion: Evaluating PFLT's Dividend Profile
In conclusion, while PennantPark Floating Rate Capital Ltd's dividend yield is attractive and the company has a history of consistent dividend growth, the current payout ratio and mixed growth metrics warrant a closer examination of dividend sustainability. Investors should consider the company's fair profitability and potential for revenue and earnings growth when evaluating the future prospects of PennantPark Floating Rate Capital Ltd's dividend payments. For those seeking to expand their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for further research.
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.
