Templeton Emerging Markets Income Fund: Distribution Trends and Peer Comparison

The Templeton Emerging Markets Income Fund (TEI) recently announced its notification of sources of distributions, highlighting the fund's commitment to providing high, current income to its investors. As of July 29, 2024, the fund's annualized distribution rate on NAV was 9.71%, with a total return on NAV of 11.82% over the past year. This article will delve into the key factors driving TEI's distribution rate, its evolution over time, and how it compares to its peers in the emerging market income category.



Key factors driving TEI's distribution rate

TEI's distribution rate is primarily influenced by its investment objective, which focuses on seeking high, current income with a secondary goal of capital appreciation. The fund invests at least 80% of its net assets in income-producing securities of sovereign or sovereign-related entities and private sector companies in emerging market countries. The distribution rate is determined by the income generated from these investments and the fund's expense ratio.

As of July 29, 2024, the fund's distribution rate was 10.31%, with a distribution amount of $0.0475 per share, paid monthly. The average portfolio coupon was 7.69%, indicating the average yield of the bonds held in the fund's portfolio. The total % portfolio effectively leveraged was 15.28%, reflecting the fund's use of leverage to potentially enhance income and returns.

Evolution of TEI's distribution rate over time

TEI's distribution rate has evolved over time, reflecting changes in the fund's portfolio and market conditions. In 2023, the fund's distribution rate was 10.31%, compared to 3.86% in 2022 and 3.45% in 2021. The fund's performance has varied year by year, with returns ranging from -15.47% in 2022 to 18.07% in 2016. The fund's expense ratio, which affects the net income available for distribution to shareholders, was 2.30% as of December 31, 2023.

Comparison with peers in the emerging market income category

To compare TEI's distribution history with its peers in the emerging market income category, we can look at the annualized distribution rate on NAV and the total return on NAV over the past year. As of 7/29/2024, TEI had an annualized distribution rate on NAV of 9.71% and a total return on NAV of 11.82% over the past year. According to the Morningstar US CEF Emerging Market Income category, the average annualized distribution rate for the category was 8.50% as of 6/30/2024, and the average total return on NAV for the category was 10.50% over the past year.

This comparison suggests that TEI has been performing well relative to its peers in the emerging market income category. The fund's higher distribution rate indicates that it has been generating more income for investors compared to the average fund in the category. Additionally, the fund's higher total return suggests that it has been able to generate more overall returns for investors compared to the average fund in the category.

However, it is important to note that past performance is not indicative of future results, and TEI's performance may vary in the future. Additionally, the fund's higher distribution rate and total return may be due to higher risk or volatility compared to its peers. Therefore, it is important to consider the fund's risk profile and other factors when making investment decisions.

In conclusion, TEI's distribution history compares favorably to its peers in the emerging market income category, with a higher distribution rate and total return than the category average. However, investors should consider the fund's risk profile and other factors when making investment decisions. The fund's distribution rate is primarily influenced by its investment objective, portfolio composition, expense ratio, and market conditions, and has evolved over time, reflecting changes in the fund's performance and market conditions.