Stable Dividends and Strategic Exposure: Analyzing First Trust's Preferred Income Fund

The First Trust Intermediate Duration Preferred & Income Fund (NYSE: FPF) has maintained a disciplined approach to income distribution, recently declaring a consistent $0.1375 per-share dividend for its February through May 2025 payouts. This stability underscores the fund’s focus on providing reliable cash flow to investors, even as it navigates the complexities of preferred securities markets. Below, we dissect the implications of FPF’s dividend policy, its investment strategy, and the risks that accompany its performance.

The Dividend Blueprint: Stability Amid Volatility

FPF’s dividend declaration dates, ex-dividend dates, and payment schedules follow a predictable rhythm, with each month’s distribution announced in the prior month. For instance, the February 2025 dividend was declared on January 21, 2025, with an ex-dividend date of February 3 and payment on February 18. This pattern has held steady through April 2025, ensuring shareholders can plan for recurring income.

At face value, the $0.1375 monthly dividend translates to an annualized yield of $1.65 per share. However, the fund’s yield fluctuates depending on its price. As of April 17, 2025, FPF’s net asset value (NAV) stood at $18.31, while its market price was $17.11—a discount of approximately 6.6%. This discrepancy creates two yield metrics: 9.01% based on NAV and 9.64% using the market price.

The fund’s ability to stabilize its market price through steady distributions is a key selling point. would reveal how this strategy has dampened volatility relative to its NAV. For income-focused investors, this predictability can outweigh short-term price fluctuations.

Investment Strategy: A Blend of Duration and Diversification

FPF’s mandate is to invest in preferred and income-producing securities, including U.S. and international issuers, with a target duration of 3–8 years (excluding leverage). This focus on intermediate-term debt aligns with strategies to mitigate interest rate risk while targeting steady income streams.

The fund’s sub-adviser, Stonebridge Advisors LLC, manages over $13 billion in preferred and hybrid securities, suggesting expertise in navigating this niche market. Meanwhile, First Trust Advisors L.P., the fund’s adviser, oversees $258 billion in assets as of March 2025—a scale that can enhance liquidity and research capabilities.

The portfolio’s exposure to the financial sector is notable, as preferred stocks in banks and insurance firms often dominate this asset class. This concentration, however, introduces sector-specific risks, such as regulatory changes or economic downturns impacting financial institutions.

Risks and Considerations

While FPF’s dividend stability is appealing, several risks warrant attention:

1. Credit Risk: The fund holds below-investment-grade securities, which carry higher default risk. If economic conditions deteriorate, the credit quality of these holdings could decline.
2. Market Volatility: Preferred securities are sensitive to interest rate shifts. Rising rates could pressure prices, though FPF’s intermediate duration may offer some insulation.
3. Tax Complexity: Distributions may include returns of capital, short-term capital gains, or income—a mix that complicates tax planning. Investors must await the annual Form 1099-DIV for precise characterization.

The Bottom Line: A Solid Bet for Income Seekers, With Caveats

FPF’s consistent $0.1375 dividend and its focus on preferred securities make it a viable option for investors prioritizing stable income. The fund’s 9.64% yield at its April 2025 market price is compelling, especially compared to lower-yielding bond alternatives. However, shareholders must weigh this against the risks of credit exposure and sector concentration.

The fund’s track record of steady distributions, coupled with its adviser’s resources, supports its role in a diversified income portfolio. For conservative investors, FPF’s structure offers a middle ground between the volatility of equities and the lower yields of traditional bonds.

Conclusion

First Trust’s Intermediate Duration Preferred & Income Fund remains a compelling choice for income-focused investors, particularly those willing to accept moderate risk in pursuit of a high yield. With an annualized dividend of $1.65 per share and a yield exceeding 9%, FPF balances predictability with growth potential. However, its reliance on the financial sector and exposure to credit risk means investors should monitor broader economic trends and the fund’s NAV closely.

For now, the data supports FPF’s value proposition: a disciplined dividend policy, experienced management, and a strategy tailored to intermediate-duration securities. Yet, as with any investment, due diligence—including a review of FPF’s latest filings and NAV trends—is essential to align its risks with individual financial goals.