ETF Education Report: First Trust Intermediate Duration Preferred & Income Fund (FPF)

What this ETF is trying to do

The First Trust Intermediate Duration Preferred & Income Fund (FPF) is an exchange-traded fund (ETF). Based on its name, this fund focuses on providing income through preferred securities.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out to investors.

For FPF, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -12.98%, while the total return is approximately -7.56%.

• One Year: The price return was approximately -16.86%, while the total return was approximately -9.06%.

• Three Years: The price return was approximately 8.50%, while the total return was much higher at approximately 42.34%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was about $19.51. The current price is $16.22.

Income and distribution explanation

This ETF has a high distribution yield of approximately 10.17%. This means the fund pays out a significant amount of cash relative to its share price. These distributions are usually paid monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Total return is the most accurate way to see how much value was actually gained or lost over time.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price does not always mean the NAV is shrinking, we use "erosion scores" to measure this risk.

FPF has an erosion score of 55, which is labeled as "Moderate price erosion." This is a measurement of risk regarding how the share price has behaved over time.

Pros

• The fund offers a high distribution yield of approximately 10.17%.

• Over a three-year period, the total return was positive at approximately 42.34%.

Cons

• The one-year price return has been negative (approximately -16.86%).

• The fund shows a moderate erosion-risk score.

Beginner takeaway

When looking at high-income ETFs like FPF, it is vital to look at both the distribution yield and the total return. A high yield provides cash, but if the share price is falling significantly, it can impact your overall investment value. Always check the total return to see how much the price changes are affecting your money.