First Trust Mortgage Income Fund Declares its Monthly Common Share Distribution of $0.0825 Per Share for February
- The Fund has declared a monthly common share distribution of $0.0825 per share.
- The distribution rate based on the January 19, 2024 NAV is 7.87%, and based on the closing market price is 8.34%.
- First Trust Mortgage Income Fund primarily invests in mortgage-backed securities.
- The Fund aims to provide a high level of current income while seeking to preserve capital.
- First Trust Advisors L.P. has approximately $210 billion in assets under management.
- The Fund's distribution may come from net investment income, net short-term realized capital gains, or return of capital, which presents a risk to investors.
- The Fund's investments are subject to various risks, including market risk, current market conditions risk, and risks associated with debt securities, mortgage-backed securities, and futures contracts.
Insights
The declaration of a regular monthly distribution by First Trust Mortgage Income Fund (FMY) can have tangible effects on investor sentiment and fund performance. The distribution rate of 7.87% based on the NAV and 8.34% based on the closing market price is significant when compared to the average dividend yield for the S&P 500, which historically hovers around 2%. This high distribution rate can be attractive to income-focused investors, particularly in a low-interest-rate environment.
However, it's crucial to consider the sustainability of such distributions. A portion of the distribution may come from return of capital, which is not derived from the fund's earnings but rather from the invested capital itself. This could indicate that the fund's investments are not generating enough income, potentially impacting the fund's long-term ability to maintain its current distribution level.
Moreover, the fund's investment in mortgage-backed securities introduces specific risks, such as interest rate risk and credit risk, which could affect the fund's performance, especially in a climate of rising interest rates as indicated by current Federal Reserve policies. Investors should closely monitor these risk factors in relation to their investment strategies.
Considering the broader economic context, the distribution announcement comes at a time when the market is adapting to higher interest rates and potential quantitative easing reversals. The Fund's focus on mortgage-backed securities means its performance is closely tied to the real estate market and interest rate changes. The recent mention of bank failures and market volatility highlights the need for investors to factor in the current market conditions risk when evaluating such investments.
Additionally, the transition away from LIBOR as a reference rate may have implications for the Fund's investments. The uncertainty surrounding this transition could affect the valuation and liquidity of the Fund's assets, potentially leading to increased volatility in the Fund's performance. The geopolitical tensions and ongoing public health issues, such as the COVID-19 pandemic, add another layer of uncertainty that could influence market dynamics and the Fund's operations.
From a regulatory standpoint, the Fund's compliance with investment advisories and broker-dealer regulations is crucial for maintaining investor confidence. The disclosure that FTA and FTP are privately-held companies suggests a level of operational autonomy, which could influence the Fund's management strategies and risk profile. Investors should be aware of the regulatory environment governing such entities, as changes in legislation or enforcement priorities could impact the Fund's operations and, consequently, investor returns.
Furthermore, the Fund's risk factors, as detailed in its annual shareholder reports and other regulatory filings, provide essential information for investors. The identification and order of risk factors do not necessarily reflect the severity of each risk, but rather serve as a comprehensive list that must be considered in the context of the Fund's investment strategy and market conditions. It is imperative for investors to understand these risks in conjunction with the Fund's distribution declarations to make informed investment decisions.
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First Trust Mortgage Income Fund (FMY): |
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Distribution per share: |
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Distribution Rate based on the January 19, 2024 NAV of |
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Distribution Rate based on the January 19, 2024 closing market price of |
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A portion of this distribution may come from net investment income, net short-term realized capital gains or 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 preserve capital. The Fund pursues these investment objectives by investing primarily in mortgage-backed securities representing part ownership in a pool of either residential or commercial mortgage loans that, in the opinion of the Fund's portfolio managers, offer an attractive combination of credit quality, yield and maturity.
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
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 security, or shares of a fund in general may fall in value. Securities are subject to market fluctuations caused by such factors as general economic conditions, political events, regulatory 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, spread of infectious disease or other public health issues, recessions, natural disasters or other events could have significant negative impact on a fund.
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
The debt securities in which the Fund invests are subject to certain risks, including issuer risk, reinvestment risk, prepayment risk, credit risk, interest rate risk and liquidity risk. Issuer risk is the risk that the value of fixed-income securities may decline for a number of reasons which directly relate to the issuer. Reinvestment risk is the risk that income from the Fund's portfolio will decline if the Fund invests the proceeds from matured, traded or called bonds at market interest rates that are below the Fund portfolio's current earnings rate. Prepayment risk is the risk that, upon a prepayment, the actual outstanding debt on which the Fund derives interest income will be reduced. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Interest rate risk is the risk that fixed-income securities will decline in value because of changes in market interest rates. Liquidity risk is the risk that illiquid and restricted securities may be difficult to value and to dispose of at a fair price at the times when the Fund believes it is desirable to do so.
A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such security and the structure of its issuer. For example, if a mortgage underlying a particular mortgage-backed security defaults, the value of that security may decrease. Moreover, a downturn in the markets for residential or commercial real estate or a general economic downturn could negatively affect both the price and liquidity of privately issued mortgage-backed securities. A portion of the Fund's managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes are subject to a greater degree of non-payment risk than are senior classes of the same issuer or agency.
The London Interbank Offered Rate ("LIBOR") has ceased to be made available as a reference rate. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests is difficult to predict and could result in losses to the fund. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades.
Investments in asset-backed or mortgage-backed securities offered by non-governmental issuers, such as commercial banks, savings and loans, private mortgage insurance companies, mortgage bankers and other secondary market issuers are subject to additional risks.
The primary risks associated with the use of futures contracts are (a) the imperfect correlation between the change in market value of the instruments or indices underlying the futures contracts and the price of the futures contracts; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser's inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors; and (e) the possibility that the counterparty will default in the performance of its obligations.
If a security sold short increases in price, the Fund may have to cover its short position at a higher price than the short sale price, resulting in a loss.
Repurchase agreements are subject to the risk of failure. If the Fund's counterparty defaults on its obligations and the Fund is delayed or prevented from recovering the collateral, or if the value of the collateral is insufficient, the Fund may realize a loss.
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 reports 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.
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Press Inquiries Ryan Issakainen 630-765-8689
Analyst Inquiries Jeff Margolin 630-915-6784
Broker Inquiries Sales Team 866-848-9727
Source: First Trust Mortgage Income Fund
FAQ
What is the monthly common share distribution declared by First Trust Mortgage Income Fund (FMY)?
When is the distribution payable to shareholders?
What is the distribution rate based on the January 19, 2024 NAV and closing market price?
What is the primary investment focus of First Trust Mortgage Income Fund?
What is the role of First Trust Advisors L.P. in managing the Fund?
