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

What this ETF is trying to do

The First Trust Dynamic Europe Equity Income Fund (FDEU) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the data, the name suggests it focuses on European stocks that provide income to investors.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price. For FDEU, the one-year price return was approximately 14.14%. The three-year price return was approximately 12.21%.

• Total Return: This is a more complete measure because it includes both the share price changes and the money paid out to investors through distributions. For FDEU, the one-year total return was approximately 21.99%, and the three-year total return was approximately 34.96%.

The current price of the ETF is $12.59. Based on the one-year price return, the estimated price from roughly one year ago was approximately $11.03.

Income and distribution explanation

This ETF provides cash to investors through distributions. The distribution yield is approximately 6.59%. This number describes the cash payments relative to the current ETF price. Over the last 12 months, there were 12 distributions, and they are usually paid out monthly.

It is important to remember that a high distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment (your principal) will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in the fund decreases significantly. StockValueFinder uses an "erosion-risk score" to measure this risk.

For FDEU, the erosion-risk score is 100, which is labeled as "No price erosion detected." The erosion severity is rated as "good," and there is no severe erosion-risk flag. This means the data does not show signs of the fund's value being worn away by falling prices.

Pros

• The ETF has shown positive price returns over the one-year and three-year periods.

• The total return figures are higher than the price return figures, showing that distributions have added value to the overall return.

• The erosion-risk measurements suggest a stable price history.

Cons

• Total holdings and specific top holdings were not supplied in the data, so the specific companies owned by the fund are unknown.

Beginner takeaway

When you look at an ETF like FDEU, always check both the price return and the total return. The price return tells you how the share price moved, but the total return shows you how much you actually earned including the cash distributions. Because this fund has a distribution yield of 6.59%, the total return is higher than the price return alone. Always keep in mind that distributions provide cash, but they are separate from the movement of the share price.