ETF Report: First Trust North American Energy Infrastructure Fund (EMLP)

What this ETF is trying to do

The EMLP ETF focuses on energy infrastructure in North America. This means it invests in companies that help move and store energy, such as pipelines or storage facilities. It is an exchange-traded fund (ETF), which is a way to buy a group of different stocks all at once through the NYSE.

What the numbers show

The current price for one share of EMLP is $44.31. Looking back at the last year, the price has grown quite a bit. One year ago, the estimated price was about $37.17.

If you look at the total returns, which include both price changes and extra payments, the one-year total return was 22.8079%. Over three years, the total return was even higher at 78.7716%. This shows that the value of the fund has increased significantly over a longer period.

Income and distribution explanation

Some investors look for ETFs that pay them regular money, which is called a "distribution." EMLP has a distribution yield of 2.7416%. Over the last 12 months, it made four payments to its investors. These payments usually happen every three months (quarterly).

It is important to remember that a high yield alone can be misleading. A high percentage might look good, but you must also look at whether the share price is staying steady or falling.

NAV erosion explanation

"NAV erosion" happens when an ETF's share price keeps dropping over time because it is paying out more money than it is actually earning. Think of it like a bucket with a hole in the bottom; if you keep pouring water (money) out, the level in the bucket (the share price) will drop.

If an ETF has severe erosion, a high share price can fall to a much lower price very quickly. This can destroy your "principal," which is the original amount of money you put in. However, for EMLP, no price erosion was detected. The erosion score is 100, which is labeled as "good."

Pros

• The fund has shown strong growth over one year and three years.

• It provides regular income through quarterly distributions.

• There is no sign of the share price being destroyed by erosion.

Cons

• The returns are tied to the energy infrastructure sector, which can change based on how much energy is used.

Beginner takeaway

Income investors usually prefer ETFs that go sideways (stay at the same price) or move slightly up. They prefer this because they want their original investment to stay safe while they collect the extra payments. If an ETF's price collapses, the money you lose in the share price might be much larger than the income you gained. In the case of EMLP, the data shows the price has been moving up rather than collapsing.