First Trust Specialty Finance and Financial Opportunities Fund Increases its Quarterly Distribution to $0.10 Per Share

Rhea-AI Summary

First Trust Specialty Finance and Financial Opportunities Fund (NYSE: FGB) announced an increase in its quarterly distribution to $0.10 per share, up from $0.0825, effective May 31, 2024. This represents a 21.21% increase. The distribution rate is 8.95% based on the NAV of $4.47 and 10.31% based on the market price of $3.88 as of May 10, 2024. The ex-dividend date is May 22, 2024, and the record date is May 23, 2024. A portion of this distribution may be sourced from capital gains and return of capital. The Fund aims to provide high current income and attractive total returns by investing at least 80% of its managed assets in specialty finance and financial companies. First Trust Advisors manages the Fund, boasting approximately $218 billion in assets as of April 30, 2024. Confluence Investment Management serves as the investment sub-advisor, managing $13 billion in assets as of March 31, 2024.

Positive

• Quarterly distribution increased by 21.21% to $0.10 per share.
• Distribution rate of 8.95% based on NAV and 10.31% based on market price.
• Record date for the distribution is May 23, 2024.
• Ex-dividend date is May 22, 2024.
• Fund managed by First Trust Advisors with $218 billion in assets under management.
• Sub-advised by Confluence Investment Management with $13 billion in assets.

Negative

• A portion of the distribution may come from capital gains and return of capital, indicating possible limitations in net investment income.
• Fund investments concentrated in the financial sector, increasing exposure to sector-specific risks.
• Potential volatility due to current global economic conditions, including interest rate changes and geopolitical events.
• Investments in BDCs and REITs are subject to unique risks including interest rate sensitivity and default risks.
• Use of leverage can magnify losses, adding additional risk and cost.

Insights

Financial Analyst

The increase in the quarterly distribution to $0.10 per share from $0.0825 per share represents a 21.21% boost. This is a significant raise and could be seen as a positive signal regarding the Fund’s cash flow and financial health. A higher distribution rate can make the Fund more attractive to income-focused investors, especially considering the current environment of rising interest rates. The distribution rate, calculated based on the May 10, 2024, NAV and closing market price, stands at 8.95% and 10.31%, respectively. These figures are quite generous compared to the average dividends offered by other funds, which typically oscillate around 2% - 4%. However, a portion of the distribution may come from sources other than net investment income, such as capital gains or return of capital, which could imply that the Fund is returning some of the investors' own capital.

Furthermore, the Fund invests heavily in the specialty finance sector, which has its own set of risks, including sensitivity to interest rate changes and economic conditions. Despite these risks, the substantial distribution increase could indicate strong underlying performance or strategic asset sales.

Investors should also keep an eye on the Fund's leverage, which can amplify gains but also increase risks. Their ongoing performance and the final determination of the distribution source at the end of the year will be crucial.

Market Research Analyst

The increase in distribution may be aimed at appealing to a broader investor base, particularly those seeking higher yields in a low-yield environment. Given the recent turbulence in financial markets, this move could also be a strategy to maintain or attract investor interest. The Fund's focus on specialty finance and financial companies suggests exposure to higher-risk, higher-reward investments, which may justify the higher distribution rate but also comes with increased volatility.

It's also important to consider the broader market context. With the Federal Reserve raising interest rates and ongoing geopolitical tensions, the financial sector could face challenges. However, funds that manage to provide steady or increasing distributions could outperform peers. For retail investors, the risk-return tradeoff must be carefully evaluated, especially given that part of the distribution may be classified as a return of capital.

Finally, the management’s expertise and historical performance could provide some reassurance. Confluence Investment Management’s extensive experience and the fact that they manage substantial assets under advisement may mitigate some risks, though this is not a guarantee of future performance.

WHEATON, Ill.--(BUSINESS WIRE)-- First Trust Specialty Finance and Financial Opportunities Fund (the "Fund") (NYSE: FGB) has increased its regularly scheduled quarterly distribution to $0.10 per share from $0.0825 per share The distribution will be payable on May 31, 2024, to shareholders of record as of May 23, 2024. The ex-dividend date is expected to be May 22, 2024. The quarterly distribution information for the Fund appears below.

First Trust Specialty Finance and Financial Opportunities Fund (FGB):

Distribution per share:	$0.10
Distribution Rate based on the May 10, 2024 NAV of $4.47:	8.95%
Distribution Rate based on the May 10, 2024 closing market price of $3.88:	10.31%
Increase from previous distribution of $0.0825:	21.21%

A portion of the distribution may be treated as paid from sources other than net investment income, including short-term capital gain, long-term capital gain and return of capital. The final determination of the source and tax status of all distributions paid in 2024 will be made after the end of 2024 and will be provided on Form 1099-DIV.

The Fund is a diversified, closed-end management investment company that seeks to provide a high level of current income. As a secondary objective, the Fund seeks to provide attractive total return. The Fund pursues these investment objectives by investing at least 80% of its managed assets in a portfolio of securities of specialty finance and other financial companies that the Fund's investment sub-advisor believes offer attractive opportunities for income and capital appreciation.

First Trust Advisors L.P. ("FTA") is a federally registered investment advisor and serves as the Fund's investment advisor. FTA and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA registered broker-dealer, are privately-held companies that provide a variety of investment services. FTA has collective assets under management or supervision of approximately $218 billion as of April 30, 2024 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. FTA is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. FTA and FTP are based in Wheaton, Illinois.

Confluence Investment Management LLC ("Confluence"), an SEC registered investment advisor, serves as the Fund's investment sub-advisor. The Confluence team has more than 600 years of combined financial experience and 400 years of portfolio management/research experience, maintaining a track record that dates back to 1994. As of March 31, 2024, Confluence had $13.0 billion in assets under management and advisement (assets under management = $7.5 billion; assets under advisement = $5.5 billion).

Principal Risk Factors: Risks are inherent in all investing. Certain risks applicable to the Fund are identified below, which includes the risk that you could lose some or all of your investment in the Fund. The principal risks of investing in the Fund are spelled out in the Fund's annual shareholder reports. The order of the below risk factors does not indicate the significance of any particular risk factor. The Fund also files reports, proxy statements and other information that is available for review.

Past performance is no assurance of future results. Investment return and market value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. There can be no assurance that the Fund's investment objectives will be achieved. The Fund may not be appropriate for all investors.

Market risk is the risk that a particular investment, or shares of a fund in general may fall in value. Investments held by the Fund are subject to market fluctuations caused by real or perceived adverse economic conditions, political events, regulatory factors or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result. In addition, local, regional or global events such as war, acts of terrorism, market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition of sanctions and other similar measures, spread of infectious disease or other public health issues, recessions, natural disasters or other events could have significant negative impact on a fund and its investments.

Current market conditions risk is the risk that a particular investment, or shares of the fund in general, may fall in value due to current market conditions. As a means to fight inflation, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal Reserve has announced that it intends to reverse previously implemented quantitative easing. Recent and potential future bank failures could result in disruption to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which may also heighten market volatility and reduce liquidity. Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities have and could continue to have a significant impact on certain fund investments as well as fund performance and liquidity. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets, negatively impacting global growth prospects.

The Fund invests in business development companies ("BDCs") which may be subject to a high degree of risks, including management's ability to meet the BDC's investment objective, and to manage the BDC's portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors' perceptions regarding a BDC or its underlying investments change.

Investing in real estate investment trusts ("REITs") involves certain unique risks in addition to investing in the real estate industry in general. REITs are subject to interest rate risk and the risk of default by lessees or borrowers.

The Fund may invest in a variety of other mortgage-related securities. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates, and may reduce the market value of the securities. In addition, mortgage-related securities are subject to the risk that borrowers may pay off their mortgages sooner than expected, particularly when interest rates decline. This can reduce the Fund's returns. The Fund's investments in other asset-backed securities are subject to risks similar to those associated with mortgage-backed securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.

Because the Fund is concentrated in the financials sector, it will be more susceptible to adverse economic or regulatory occurrences affecting this sector, such as changes in interest rates, availability and cost of capital funds, and competition.

Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.

The risks of investing in the Fund are spelled out in the shareholder report and other regulatory filings.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.

The Fund’s daily closing New York Stock Exchange price and net asset value per share as well as other information can be found at https://www.ftportfolios.com or by calling 1-800-988-5891.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240513953183/en/

Press Inquiries, Ryan Issakainen, 630-765-8689

Analyst Inquiries, Jeff Margolin, 630-915-6784

Broker Inquiries, Sales Team, 866-848-9727

Source: First Trust Specialty Finance and Financial Opportunities Fund

FAQ

When will FGB's increased quarterly distribution be paid?

The increased quarterly distribution of $0.10 per share will be paid on May 31, 2024.

What is the ex-dividend date for FGB's quarterly distribution?

The ex-dividend date for FGB's quarterly distribution is May 22, 2024.

What is the new distribution rate for FGB based on NAV?

The new distribution rate for FGB is 8.95% based on the NAV of $4.47 as of May 10, 2024.

How much has FGB's quarterly distribution increased?

FGB's quarterly distribution increased by 21.21% from $0.0825 to $0.10 per share.

Who manages the First Trust Specialty Finance and Financial Opportunities Fund (FGB)?

First Trust Advisors L.P. manages the First Trust Specialty Finance and Financial Opportunities Fund (FGB).

What is the record date for FGB's upcoming distribution?

The record date for FGB's upcoming distribution is May 23, 2024.

What are the main risks associated with investing in FGB?

Risks include market risk, sector-specific risk, interest rate risk, leverage risk, and risks associated with investments in BDCs and REITs.

What portion of FGB's distribution might come from non-net investment income sources?

A portion of FGB's distribution may come from short-term capital gains, long-term capital gains, or return of capital.