First Trust Senior Floating Rate Income Fund II Announces Dividend: Market Impact and Investment Implications on Dec 1

Introduction

First Trust Senior Floating Rate Income Fund II (FCT), a closed-end fund focused on floating-rate loans, has announced a cash dividend of $0.0970 per share, to be paid on the ex-dividend date of December 1, 2025. This payout aligns with the fund’s consistent income-oriented strategy. Compared to industry peers in the senior loan space, FCT has historically maintained a relatively high and regular dividend yield, reflecting its focus on high-yield, short-duration debt.

As the market approaches the ex-dividend date, investors are likely watching closely for price adjustments and potential rebalancing opportunities. The current macroeconomic environment—marked by relatively high interest rates and a resilient corporate loan market—supports FCT’s ability to maintain its yield without compromising liquidity or credit quality.

Dividend Overview and Context

For income-focused investors, understanding key dividend metrics is essential. The ex-dividend date, December 1, 2025, marks the first day the stock will trade without the right to receive the latest dividend. Historically, share prices for funds like FCT tend to adjust downward by approximately the dividend amount on or around this date, reflecting the transfer of value to shareholders.

This dividend of $0.0970 per share represents a consistent payout and signals the fund’s confidence in its earnings and liquidity. Given the absence of a stock dividend, the entire payout is in cash, which is favorable for income-seekers. The ex-dividend date is likely to see a modest price correction, but this should not be seen as a negative—rather, it may present a short-term entry point for investors interested in the fund’s yield.

Backtest Analysis

The backtest analysis for FCT offers valuable insight into the typical post-ex-dividend price behavior. The data reveals that, on average, the fund’s price recovers its dividend-induced drop in approximately 6.27 days. Moreover, there’s a 58% probability of recovery within 15 days, suggesting a moderate but reasonably quick rebound. This performance supports the idea that while the ex-dividend dip is temporary, it often does not reflect underlying fundamentals.

The backtest evaluated historical price movements over multiple dividend cycles, with assumptions that include reinvestment of dividends and a constant-dollar strategy. While the results are not predictive, they suggest a potential tactical advantage for investors who are prepared to hold FCT for the next 1–2 weeks following the ex-date to capture the typical price normalization.

Driver Analysis and Implications

FCT’s latest dividend is supported by strong operational and financial performance. The fund’s latest financial report shows an operating income of $27,345,672 and net income of $32,121,929, with a total basic earnings per common share of $1.2362. These figures indicate robust earnings generation, which is critical for sustaining the fund’s dividend.

The fund’s ability to pay a consistent and generous dividend is further supported by its high total revenue of $30,616,276, despite a substantial interest expense of $3,774,352. This suggests the fund is leveraging its capital base effectively to generate returns.

From a macroeconomic standpoint, the recent rise in interest rates has been favorable for floating-rate loan funds like FCT, as borrowers pay higher interest as rates rise. This aligns with the fund’s investment strategy and supports continued performance and dividend sustainability.

Investment Strategies and Recommendations

For short-term investors, the ex-dividend date offers a potential opportunity to purchase FCT at a slight discount, anticipating a price rebound. With a 58% probability of recovery within two weeks, those with a moderate time horizon might consider entering on or after the ex-date.

Long-term investors should focus on the fund’s consistent earnings and the broader macroeconomic environment. Given FCT’s high-yield, floating-rate structure, it can serve as a defensive position in a diversified portfolio, particularly in a rising rate environment.

Investors should also consider the reinvestment potential of the $0.0970 dividend per share, using it to accumulate more shares or invest in other high-conviction positions.

Conclusion & Outlook

First Trust Senior Floating Rate Income Fund II’s upcoming dividend of $0.0970, set to go ex-dividend on December 1, 2025, reflects a strong and consistent income-producing strategy. While the ex-dividend adjustment is expected, the historical data suggests a reasonably quick price rebound. Investors should view the ex-dividend date not as a sell signal but as a potential buying opportunity.

Looking ahead, the next earnings report and any subsequent dividend announcement will provide further insight into the fund’s ongoing performance and its ability to maintain its generous yield. Investors are advised to monitor both market trends and FCT’s operational results to make informed decisions.