A Deep Dive into the Dividend Performance and Sustainability of Mfs High Yield Municipal Trust
Mfs High Yield Municipal Trust (CMU, Financial) recently announced a dividend of $0.01 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-12. 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 deep dive into Mfs High Yield Municipal Trust's dividend performance and assess its sustainability.
What Does Mfs High Yield Municipal Trust Do?
Mfs High Yield Municipal Trust is a United States-based diversified, closed-end management investment company. Its investment objective is to seek high current income exempt from federal income tax. The fund invests a majority of its net assets, including assets attributable to preferred shares and borrowings for investment purposes, in tax-exempt bonds and tax-exempt notes.
A Glimpse at Mfs High Yield Municipal Trust's Dividend History
Mfs High Yield Municipal Trust has maintained a consistent dividend payment record since 1988. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Mfs High Yield Municipal Trust's Dividend Yield and Growth
As of today, Mfs High Yield Municipal Trust currently has a 12-month trailing dividend yield of 4.36% and a 12-month forward dividend yield of 4.26%. This suggests an expectation of decrease dividend payments over the next 12 months.
Mfs High Yield Municipal Trust's dividend yield of 4.36% is near a 10-year low and underperforms than 66.64 of global competitors in the Asset Management industry, suggesting that the company's dividend yield may not be a compelling proposition for income investors.
Over the past three years, Mfs High Yield Municipal Trust's annual dividend growth rate was -8.40%. Extended to a five-year horizon, this rate increased to -7.90% per year.
Based on Mfs High Yield Municipal Trust's dividend yield and five-year growth rate, the 5-year yield on cost of Mfs High Yield Municipal Trust stock as of today is approximately 2.89%.
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 2023-05-31, Mfs High Yield Municipal Trust's dividend payout ratio is 0.00.
Mfs High Yield Municipal Trust's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Mfs High Yield Municipal Trust's profitability 3 out of 10 as of 2023-05-31, suggesting the dividend may not be sustainable. The company has reported net profit in 5 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Mfs High Yield Municipal Trust's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Next Steps
While Mfs High Yield Municipal Trust has a history of consistent dividend payments, its low dividend yield and negative growth rate raise concerns about the sustainability of future dividends. Coupled with a zero payout ratio and a low profitability rank, the company may need to bolster its growth metrics to ensure the sustainability of its dividends. Investors should consider these factors while making investment decisions.
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