ETF Report: First Trust New Opportunities MLP & Energy Fund (FPL)

What this ETF is trying to do

The First Trust New Opportunities MLP & Energy Fund, known by its ticker symbol FPL, is an exchange-traded fund (ETF). This type of fund focuses on the energy sector, specifically looking at Master Limited Partnerships (MLPs) and other energy companies. Its goal is to provide investors with exposure to these specific types of energy businesses.

What the numbers show

As of May 3, 2024, the current price of one share is $7.76. Looking back at the past year, the fund has seen significant growth. The price one year ago was estimated to be around $5.83. This means the price alone grew by about 33.10% over the last twelve months.

When you look at "total return," which includes both price changes and the money paid out to investors, the numbers are even higher. The one-year total return was 41.67%. So far this year (Year-to-Date), the total return is 15.18%.

Income and distribution explanation

Some investors look for ETFs that pay them regular cash, which is called a "distribution." This fund has a distribution yield of about 5.32%. Over the last 12 months, it made 11 payments to shareholders. These payments usually happen once a month.

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

NAV erosion explanation

"NAV erosion" happens when the value of the underlying assets in the fund drops so much that the share price keeps falling over time. If an ETF's price collapses from a high number to a much lower number, it can destroy your "principal." Principal is the original amount of money you put in. For example, if you invested $10,000 and the price dropped significantly, you might end up with much less than $10,000, even if the fund pays you cash along the way.

Fortunately, for FPL, no price erosion has been detected. The "erosion score" is 100, which is considered good. This means the share price has been growing rather than shrinking.

Pros

• The fund has shown strong growth in both price and total returns over the last year and three years.

• It provides regular income through monthly distributions.

• There are no signs of the price being destroyed by erosion.

Cons

• The fund is focused on a specific sector (energy), which can be more volatile than other sectors.

• Investors must watch the price closely to ensure the high yield isn't coming at the expense of the share value.

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. Because FPL has shown a rising price alongside its distributions, it has avoided the trap of losing principal through erosion. Always remember to look at both the yield and the price movement together.