Insight into FFA's Dividend Sustainability and Performance
First Trust Enhanced Equity Income Fund (FFA, Financial) recently announced a dividend of $0.32 per share, payable on 2024-03-28, with the ex-dividend date set for 2024-03-22. 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 Enhanced Equity Income Fund's dividend performance and assess its sustainability.
What Does First Trust Enhanced Equity Income Fund Do?
First Trust Enhanced Equity Income Fund is a diversified, closed-end management investment company. Its investment objective is to provide a high level of current income and gains and, to a lesser extent, capital appreciation. The Fund pursues its investment objective by investing in a diversified portfolio of equity securities.
A Glimpse at First Trust Enhanced Equity Income Fund's Dividend History
First Trust Enhanced Equity Income Fund has maintained a consistent dividend payment record since 2005. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down First Trust Enhanced Equity Income Fund's Dividend Yield and Growth
As of today, First Trust Enhanced Equity Income Fund currently has a 12-month trailing dividend yield of 6.57% and a 12-month forward dividend yield of 6.57%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, First Trust Enhanced Equity Income Fund's annual dividend growth rate was 3.40%. Extended to a five-year horizon, this rate decreased to 2.60% per year. Based on First Trust Enhanced Equity Income Fund's dividend yield and five-year growth rate, the 5-year yield on cost of First Trust Enhanced Equity Income Fund stock as of today is approximately 7.47%.
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 2023-12-31, First Trust Enhanced Equity Income Fund's dividend payout ratio is 0.38.
First Trust Enhanced Equity Income Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks First Trust Enhanced Equity Income Fund's profitability 3 out of 10 as of 2023-12-31, suggesting the dividend may not be sustainable. The company has reported net profit in 5 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 Enhanced Equity Income Fund's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Revenue is the lifeblood of any company, and First Trust Enhanced Equity Income Fund's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. First Trust Enhanced Equity Income Fund's revenue has increased by approximately 9.60% per year on average, a rate that outperforms approximately 53.46% 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, First Trust Enhanced Equity Income Fund's earnings increased by approximately 9.70% per year on average, a rate that outperforms approximately 51.83% of global competitors.
Considering First Trust Enhanced Equity Income Fund's Dividend Future
Considering First Trust Enhanced Equity Income Fund's consistent dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should weigh these factors to determine the long-term sustainability of the dividends. While the payout ratio and profitability rank present cautionary signals, the revenue and earnings growth rates offer a more promising perspective. It's a balancing act that requires careful consideration of both the risks and opportunities ahead. For those seeking high-dividend yield investments, GuruFocus Premium users can explore options 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.
