ETF Education Report: First Trust Enhanced Equity Income Fund (FFA)

What this ETF is trying to do

The First Trust Enhanced Equity Income Fund (ticker: FFA) 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 providing equity income to its 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 how much the share price has changed.

• Total Return: This includes both the change in share price and the money paid out through distributions.

For FFA, the numbers show:

• Year-to-Date (YTD): The price return is approximately 1.14%, while the total return is higher at approximately 6.86%.

• One Year: The price return was approximately 5.25%, but the total return was approximately 13.21%.

• Three Years: The price return was approximately 29.25%, while the total return was approximately 59.85%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $21.16, and the current price is $22.27. If you had invested $10,000 based only on the share price, your investment would have grown to approximately $10,524.57.

Income and distribution explanation

This ETF provides cash to investors through distributions. The current distribution yield is approximately 7.13%. This means the fund paid out about $1.59 per share over the trailing period. These payments usually happen quarterly, and in the last year, there were four payouts.

It is important to remember that a high distribution yield does not guarantee the same result as total return. Investors should always look at the total return to see how much they actually earned including those cash payments.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. Some investors worry that high payouts might cause this. However, for FFA, the erosion-risk score is 100, and the label states "No price erosion detected." There is no severe erosion-risk flag for this fund.

Pros

• The fund has shown positive total returns over the one-year and three-year periods.

• The erosion-risk measurement is considered "good."

Cons

• The data provided does not list any specific top holdings, so the exact companies owned by the fund are unknown from this report.

Beginner takeaway

When evaluating an ETF like FFA, don't just look at the distribution yield. While a 7.13% yield provides cash income, the total return tells the full story of how much the investment grew by combining both price changes and those cash payments.