An In-depth Look into the Dividend Performance and Sustainability of PennantPark Floating Rate Capital Ltd
PennantPark Floating Rate Capital Ltd(PFLT, Financial) recently announced a dividend of $0.1 per share, payable on 2023-11-01, with the ex-dividend date set for 2023-10-16. 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 capital gains 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. Dividends are currently distributed on a monthly basis. PennantPark Floating Rate Capital Ltd has increased its dividend each year since 2012. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 11 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 11.12% and a 12-month forward dividend yield of 11.54%. This suggests an expectation of increase dividend payments over the next 12 months. And over the past decade, PennantPark Floating Rate Capital Ltd's annual dividends per share growth rate stands at 1.60%. 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 11.12%.
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 2023-06-30, PennantPark Floating Rate Capital Ltd's dividend payout ratio is 0.00.
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 4 out of 10 as of 2023-06-30, suggesting the dividend may not be sustainable. The company has reported positive net income for each of the 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 4 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 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 -18.00% per year on average, a rate that underperforms than approximately 75.81% 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 -34.90% per year on average, a rate that underperforms than approximately 83.81% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -28.00%, which underperforms than approximately 95.71% of global competitors.
Next Steps
In conclusion, while PennantPark Floating Rate Capital Ltd has a history of consistent dividend payments and a high dividend yield, its low payout ratio, poor profitability and growth ranks, and underperforming revenue and earnings growth rates raise concerns about the sustainability of its dividends. Investors should consider these factors and their own risk tolerance before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks 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.
