3 Funds from First Trust Declare Monthly Dividends Accompanied by 8.5%-Plus Yields
By: Ned Piplovic,
First Trust Advisors L.P. declared dividends for more than a dozen of funds it manages on March 20, 2017, but this article will focus on the three top-performing funds that pay a monthly dividend and yield at least 8.5%.
In addition to the attractive dividend yields, share prices of these funds increased between 5.7% and 19.6% over the last year. All three funds have the same ex-dividend date of April 3, 2017.
Some investors are concerned that the U.S. financial markets — especially the financial sector — are overbought and due for a correction. Therefore, these funds with exposure to the energy sector and European securities could be a good way to hedge against a potential downturn of the U.S. financial markets while generating monthly income.
First Trust New Opportunities MLP & Energy Fund (NYSE:FPL)
The New Opportunities MLP & Energy Fund is a non-diversified, closed-end management investment company. The fund seeks to provide its shareholders with a vehicle to invest in a portfolio of cash-generating securities, with a focus on investing in publicly traded master limited partnerships (MLPs) and MLP-related entities in the energy sector and energy utilities industries. Under normal circumstances, the fund will invest at least 65% of its managed assets in equity securities issued by energy sector.
Almost 90% of the fund’s assets were invested in pipelines — 75.6% — and electric power — 13.4%, as of January 31, 2017. The top holdings were: Enterprise Products Partners, L.P. (NYSE: EPD), Magellan Midstream Partners, L.P. (NYSE:MMP), Plains All American Pipeline, L.P. (NYSE:PAA) and Spectra Energy Partners, L.P. (NYSE:SEP).
The monthly dividend of $0.105 converts to an annual $1.26 payout and a 9.5% yield. The current dividend yield is almost three times higher than the fund’s running five-year average of 3.2%.
After rising 17% between March 2016 and the 52-week high in mid-July, the share price lost all those gains and dropped to its 52-week low of $10.91 by early November. Since November, the price rose 22% and is currently trading around $13, which is about 8.5% short of the July peak and 10% above the share price from March 2016.
First Trust MLP & Energy Income Fund (NYSE:FEI)
The MLP & Energy Income Fund is a non-diversified, closed-end management investment company. Similar to the FPL fund above, this fund aims to invest a minimum 65% of its managed assets in energy sector equity securities. The pipeline sector asset share in this fund is just a little over half. However, this fund is more heavily weighted in electric power with almost a quarter of its net assets invested in that sector. Another segment that has a double-digit percentage share of assets is the gathering and processing of oil and natural gas sector, with 11.7% of the current total.
The annual dividend of $1.42 is paid monthly and yields 8.6%, which is 30% higher than the average yield for the past five years.
The share price exhibited steady growth with minimal volatility. Since the 52-week low in late March 2016, the share price rose 30% by late January 2017 when it reached its 52-week high. By late March, the current price fell 6.5% below the January peak. However, the current price is still almost 20% above the low price from March 2016.
First Trust Dynamic Europe Equity Income Fund (NYSE:FDEU)
The Dynamic Europe Equity Income Fund is a non-diversified, closed-end management investment company. Under normal market conditions, the fund seeks to invest at least 80% of its managed assets in European equity securities.
Two thirds of the fund’s assets are invested in financial, industrial, consumer staples, health care and telecommunication sectors. Measured by the share of managed assets, the top five individual holdings are Roche Holding AG (SIX:ROG), Novartis AG (NYSE:NVS), Orange S.A. (NYSE:ORAN), Bayer AG (FWB: BAYN) and BP P.L.C. (NYSE:BP). British companies represent the largest share of the fund with 33%. Companies from France, Germany and Switzerland follow with shares of 20%, 15% and 13.5%, respectively.
The current annual dividend payout of $1.452 yields 8.5% and is distributed monthly. Since declaring its dividend in November 2015, the fund has been paying the same monthly amount of $0.121.
The fund’s share price rose 5.7% over the last year. Between March and end of November 2016, the share price fluctuated between $14.50 and $16.75. Since the beginning of December, the share price increased steadily and rose to $17 by the March 20, 2017.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com