While investors eagerly anticipate the upcoming dividend payment from PennantPark Floating Rate Capital Ltd (NYSE:PFLT), it’s crucial to examine the sustainability of the company’s dividend history, growth rates, and yield. By analyzing the data provided by GuruFocus, we can gain insights into PFLT’s dividend performance and evaluate its long-term viability.
Understanding PennantPark Floating Rate Capital Ltd’s Operations
PennantPark Floating Rate Capital Ltd is an externally managed, closed-end investment company that focuses on investing in Floating Rate Loans and other investments made to U.S. middle-market companies. The company generates revenue through interest income on debt securities and dividends. PFLT believes that investing in Floating Rate Loans presents an attractive risk-reward opportunity due to limited capital availability for middle-market companies and the potential for rising interest rates.
An Overview of PFLT’s Dividend History
PFLT has a commendable dividend payment record, consistently distributing dividends since 2011 on a monthly basis. Furthermore, the company has achieved “dividend achiever” status by increasing its dividend each year since 2012. This recognition is reserved for companies that have consecutively raised their dividends for at least 12 years.
Analyzing PFLT’s Dividend Yield and Growth
At present, PennantPark Floating Rate Capital Ltd boasts a 12-month trailing dividend yield of 9.96% and a 12-month forward dividend yield of 10.16%. These figures imply an expectation of increased dividend payments in the coming year. Over the past three years, PFLT has demonstrated an annual dividend growth rate of 1.30%. However, when extending this rate to a five-year timeframe, the growth rate decreases to 0.60% per year. Looking back over the past decade, PFLT has achieved an annual dividends per share growth rate of 0.90%. Considering these numbers, the current 5-year yield on cost for PFLT stock is estimated to be approximately 10.26%.
Evaluating Dividend Sustainability: Payout Ratio and Profitability
To assess the sustainability of PFLT’s dividend, it is essential to examine the company’s payout ratio, which illustrates the proportion of earnings distributed as dividends. As of September 30, 2023, PFLT’s dividend payout ratio stands at 154%, indicating that the company may not be able to sustain its dividend payments.
When considering PFLT’s profitability rank, which is assessed as 5 out of 10 by GuruFocus, fair profitability is suggested. The company has consistently reported positive net income over the past decade, further cementing its reputation for strong profitability.
Growth Metrics: Examining Future Outlook
Sustainable dividends rely on robust growth metrics. PFLT possesses a growth rank of 5 out of 10, indicating a fair growth outlook. Revenue per share and the 3-year revenue growth rate highlight PFLT’s strong revenue model, with an average annual growth rate of approximately 12.30%. This rate surpasses approximately 59.5% of global competitors.
Furthermore, PFLT’s earnings per share (EPS) have grown at an average rate of 17.90% per year over the past three years, outperforming around 61.29% of global competitors. However, when considering the 5-year EBITDA growth rate of -9.10%, which surpasses approximately 16.67% of global competitors, there are areas that warrant further attention.
In Conclusion
While PennantPark Floating Rate Capital Ltd’s dividend yield and consistent dividend growth are appealing, the current payout ratio and mixed growth metrics necessitate a closer examination of the dividend’s sustainability. Investors should take into account PFLT’s fair profitability and the potential for revenue and earnings growth when evaluating the future prospects of its dividend payments. It is important to conduct thorough research and analysis before making investment decisions. Please note that this article is not personalized financial advice but rather a general overview based on historical data and analyst projections.