First Trust's Preferred & Income Fund Maintains Steady Dividends Amid Market Volatility

The First Trust Intermediate Duration Preferred & Income Fund (FPF) has announced its May 2025 monthly common share distribution of $0.1375 per share, underscoring its reputation as a reliable income-generating vehicle for investors seeking steady payouts. With a record date of May 1 and a payable date of May 15, the distribution aligns with FPF’s long-standing strategy of providing consistent cash flows, even as broader markets grapple with uncertainty.

The Fund’s Income Machine: Strategy and Yield

FPF, a closed-end fund managed by First Trust Advisors L.P. (FTA), focuses on preferred stocks, debt securities, and convertible instruments, with at least 80% of its assets allocated to income-producing securities. This approach has enabled it to deliver a 9.01% annualized yield based on its April 17, 2025, net asset value (NAV) of $18.31, or 9.64% when calculated using its closing market price of $17.11. The fund’s yield advantages stem from its ability to invest in higher-yielding sectors while managing duration risk through intermediate-term holdings.

Navigating the Distribution Dynamics

The May 2025 distribution represents a continuation of FPF’s strategy to balance income generation with capital preservation. While the majority of the payout derives from net investment income, a portion may come from short-term capital gains or return of capital—a common feature of closed-end funds. Investors should note that the final tax characterization of distributions will be disclosed in early 2026 via Form 1099-DIV.

The fund’s closed-end structure also plays a role in its dividend stability. Unlike open-end funds, FPF’s fixed share count allows it to maintain steady payouts, potentially reducing volatility in its market price relative to its NAV. However, this comes with trade-offs: FPF’s NAV could be pressured over time if returns of capital exceed earnings.

Risks and Considerations

FPF’s high yield is not without risks. Its portfolio’s sensitivity to interest rates remains a key concern, as rising rates could depress the value of its fixed-income holdings. Additionally, preferred securities often rank behind senior debt in the event of issuer distress, amplifying credit risk. First Trust addresses this by emphasizing diversification across issuers and sectors, though concentration in certain industries could still pose challenges.

A Look at Performance and Market Context

As of March 31, 2025, FTA managed approximately $258 billion in assets, reflecting its credibility in structuring income-focused strategies. FPF’s track record since its 2013 launch includes periods of outperformance, particularly during low-rate environments. However, its recent performance has been mixed: while its NAV held up well in 2024, its market price dipped slightly due to broader sector rotations.

Conclusion: A High-Yield Play with Caveats

First Trust’s Intermediate Duration Preferred & Income Fund remains a compelling option for investors prioritizing income, especially amid a low-yield landscape. Its May 2025 distribution of $0.1375 per share, coupled with its 9.64% yield at current market prices, positions it competitively against peers. However, investors must weigh this upside against interest-rate sensitivity and the potential for return-of-capital components.

For those willing to navigate these risks, FPF’s consistent dividend history—bolstered by its closed-end structure and FTA’s track record—suggests it could remain a core holding for income-focused portfolios. Yet, as First Trust cautions, distributions are not guaranteed, and investors should carefully review the fund’s prospectus and risk disclosures before committing capital. In a market hungry for yield, FPF offers a tempting opportunity—but one that demands careful scrutiny.