ETF Report: First Trust Dynamic Europe Equity Income Fund (FDEU)

What this ETF is trying to do

The First Trust Dynamic Europe Equity Income Fund, known by its ticker symbol FDEU, is an Exchange Traded Fund (ETF). This fund focuses on European stocks. Its main goal is to provide income to investors through regular payments.

What the numbers show

As of November 20, 2023, the current price of one share is $12.59. Looking at how the fund has performed over time, we see some growth. The price from one year ago was estimated to be about $11.03.

The "total return" tells us how much money the fund made including both price changes and payments. Over the last year, the total return was 21.9981%. The Year-to-Date (YTD) total return is 18.674%. This means the fund's value has been growing over these periods.

Income and distribution explanation

Some investors look for ETFs that pay them regular cash, which are called "distributions." FDEU has a distribution yield of 6.5925%. Over the last 12 months, it made 12 payments, meaning it usually pays out money every month. The total amount paid out per share over the last year was $0.83.

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 actual price of the ETF is staying steady or falling.

NAV erosion explanation

"NAV erosion" happens when the value of the underlying assets in an ETF drops significantly over time. If an ETF's share price falls from a high number to a much lower number, it can destroy your "principal." Principal is the original money you put in. For example, if you invest $10,000 and the price collapses, you might only have $5,000 left, even if they pay you some cash.

However, for FDEU, there is no severe erosion. The data shows "No price erosion detected," which is labeled as "good."

Pros

• The fund has shown positive total returns over the last year (21.9981%) and three years (34.9615%).

• It provides regular monthly income.

• The share price has been increasing rather than falling.

Cons

• Investors must monitor if the high yield is coming at the expense of the share price.

• The fund's performance depends on the European stock market.

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 to keep their original investment safe while collecting cash. If an ETF's price collapses, the cash payments might not be enough to make up for the lost money. In the case of FDEU, the data shows the price has been rising alongside its distributions.