PCM - FTF: Failing To Cover Distributions YTD And Bonds Possibly Overpriced (Downgrade)

2024-06-26 16:18:47 ET

Summary

• Franklin Limited Duration Income Trust offers an attractive 11.59% yield, which is higher than many of its peers.
• The FTF fund's performance has been respectable, with a 6.87% total return since January, outperforming peers.
• The leverage ratio of 32.01% is reasonable, but the YTD net asset value decline raises concerns about sustaining distributions.
• The market is still pricing in two interest rate cuts for 2024, which may be optimistic.
• The fund covered its distributions in 2023, but has failed to do so year-to-date. The current price is very attractive, however.

The Franklin Limited Duration Income Trust ( FTF ) is a closed-end fund, or CEF, that income-seeking investors can purchase as a method of achieving their goals. As is the case with many closed-end funds investing in short-duration credit securities, the Franklin Limited Duration Income Trust boasts a very attractive yield that is certain to appeal to most individuals who are seeking to earn a high level of income. As of the time of writing, shares of the fund yield 11.59%, which is primarily due to a large increase in the distribution that occurred back in January:

The 11.59% yield of the Franklin Limited Duration Income Trust compares pretty well to its peers:

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