First Trust Energy Income and Growth Fund Declares its Quarterly Distribution of $0.30 Per Share

Rhea-AI Summary

First Trust Energy Income and Growth Fund (FEN) has declared a quarterly distribution of $0.30 per share, payable on January 31, 2024. The distribution rate based on the January 9, 2024 NAV is 7.50% and based on the closing market price is 8.17%. The Fund focuses on MLPs and related public entities in the energy sector, aiming for high after-tax total return with an emphasis on current distributions paid to shareholders.

Insights

Financial Analyst

The declaration of a quarterly distribution of $0.30 per share by the First Trust Energy Income and Growth Fund (FEN) represents a significant event for shareholders and potential investors. The distribution rate based on the January 9, 2024 NAV of $16.01 indicates a yield of 7.50%, while the rate based on the closing market price of $14.68 reflects an 8.17% yield. These figures are substantial when compared to the average dividend yield of the S&P 500, which has historically hovered around 2%. High distribution rates can be particularly attractive to income-focused investors, but they also warrant scrutiny regarding sustainability and coverage ratios.

Furthermore, the tax treatment of cash distributions as potentially including a tax-deferred return of capital is an important consideration. This aspect can affect the after-tax income of investors and necessitates a comprehensive understanding of individual tax implications. Additionally, the Fund's status as a 'C' corporation for tax purposes implies it is subject to corporate income tax, which can impact the net returns to investors.

Investors should also be aware of the Fund's focus on energy sector MLPs, which may offer opportunities for income and growth but also carry sector-specific risks such as commodity price volatility and regulatory changes. The Fund's non-diversified status further concentrates these risks.

Market Research Analyst

The energy sector's performance is closely tied to global economic conditions, geopolitical events and energy policies. The Fund's concentration in energy MLPs and related entities suggests a strategic focus on infrastructure and energy transportation, storage and processing, which are essential services within the energy value chain. However, the sector is sensitive to shifts in supply and demand dynamics, influenced by factors such as the transition to renewable energy sources and fluctuations in oil and gas prices.

Current market conditions, including the Federal Reserve's interest rate hikes and geopolitical tensions, add layers of risk to the Fund's performance. For instance, higher interest rates can increase borrowing costs for MLPs, which often rely on debt financing. In contrast, geopolitical tensions can lead to energy supply disruptions and price volatility, impacting the profitability and stability of energy investments.

Given the recent events such as bank failures and ongoing conflicts, which have been highlighted as risk factors, the Fund's performance could be subject to increased volatility. Investors should monitor these developments closely, as they can affect the energy sector and, consequently, the Fund's returns and the value of its distributions.

Tax Expert

Understanding the tax implications of investing in a fund that distributes a tax-deferred return of capital is crucial for shareholders. A return of capital distribution reduces an investor's cost basis in the fund, which can defer taxes but may result in a higher capital gains tax when the shares are eventually sold. The final determination of the source and tax status of all distributions, which will be provided on Form 1099-DIV after the end of 2024, is essential information for tax planning purposes.

Additionally, the Fund's structure as a 'C' corporation means it could face double taxation, where income is taxed at the corporate level and distributions are taxed again at the shareholder level. This structure contrasts with pass-through entities like traditional MLPs, which are not subject to corporate income tax. As a result, the Fund's after-tax total return objective must be evaluated in light of the corporate tax burden, which may affect the attractiveness of the investment to tax-sensitive investors.

WHEATON, Ill.--(BUSINESS WIRE)-- First Trust Energy Income and Growth Fund (the "Fund") (NYSE American: FEN) has declared the Fund's regularly scheduled quarterly distribution of $0.30 per share. The distribution will be payable on January 31, 2024, to shareholders of record as of January 23, 2024. The ex-dividend date is expected to be January 22, 2024. The quarterly distribution information for the Fund appears below.

First Trust Energy Income and Growth Fund (FEN):
Distribution per share:	$0.30
Distribution Rate based on the January 9, 2024 NAV of $16.01:	7.50%
Distribution Rate based on the January 9, 2024 closing market price of $14.68:	8.17%

It is anticipated that, due to the tax treatment of cash distributions made by the publicly-traded master limited partnerships ("MLPs") in which the Fund invests, a portion of distributions the Fund makes to Common Shareholders may consist of a tax-deferred return of capital. The final determination of the source and tax status of all distributions paid in 2024 will be made after the end of 2024 and will be provided on Form 1099-DIV.

The Fund is a non-diversified, closed-end management investment company that seeks a high level of after-tax total return with an emphasis on current distributions paid to shareholders. The Fund focuses on investing in MLPs and related public entities in the energy sector which the Fund's investment sub-advisor believes offer opportunities for income and growth. The Fund is treated as a regular corporation, or a "C" corporation, for United States federal income tax purposes and, as a result, is subject to corporate income tax to the extent the Fund recognizes taxable income.

First Trust Advisors L.P. ("FTA") is a federally registered investment advisor and serves as the Fund's investment advisor. FTA and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA registered broker-dealer, are privately-held companies that provide a variety of investment services. FTA has collective assets under management or supervision of approximately $210 billion as of December 31, 2023 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. FTA is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. FTA and FTP are based in Wheaton, Illinois.

Energy Income Partners, LLC ("EIP") serves as the Fund's investment sub-advisor and provides advisory services to a number of investment companies and partnerships for the purpose of investing in MLPs and other energy infrastructure securities. EIP is one of the early investment advisors specializing in this area. As of December 31, 2023, EIP managed or supervised approximately $5.1 billion in client assets.

Principal Risk Factors: Risks are inherent in all investing. Certain risks applicable to the Fund are identified below, which includes the risk that you could lose some or all of your investment in the Fund. The principal risks of investing in the Fund are spelled out in the Fund's annual shareholder reports. The order of the below risk factors does not indicate the significance of any particular risk factor. The Fund also files reports, proxy statements and other information that is available for review.

Past performance is no assurance of future results. Investment return and market value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. There can be no assurance that the Fund's investment objectives will be achieved. The Fund may not be appropriate for all investors.

The Fund is subject to risks, including the fact that it is a non-diversified closed-end management investment company.

Market risk is the risk that a particular security, or shares of a fund in general may fall in value. Securities are subject to market fluctuations caused by such factors as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious disease or other public health issues, recessions, natural disasters or other events could have significant negative impact on a fund.

Current market conditions risk is the risk that a particular investment, or shares of the fund in general, may fall in value due to current market conditions. As a means to fight inflation, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal Reserve has announced that it intends to reverse previously implemented quantitative easing. Recent and potential future bank failures could result in disruption to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which may also heighten market volatility and reduce liquidity. Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities have and could continue to have a significant impact on certain fund investments as well as fund performance and liquidity. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets, negatively impacting global growth prospects.

Because the Fund is concentrated in securities issued by energy companies, energy sector MLPs and MLP-related entities, it will be more susceptible to adverse economic or regulatory occurrences affecting those industries, including high interest costs, high leverage costs, the effects of economic slowdown, surplus capacity, increased competition, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.

The Fund's use of derivatives may result in losses greater than if they had not been used, may require the fund to sell or purchase portfolio securities at inopportune times, may limit the amount of appreciation the Fund can realize on an investment, or may cause the fund to hold a security that it might otherwise sell.

Investment in non-U.S. securities is subject to the risk of currency fluctuations and to economic and political risks associated with such foreign countries.

Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.

The risks of investing in the fund are spelled out in the shareholder report and other regulatory filings.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.

The Fund’s daily closing NYSE American price and net asset value per share as well as other information can be found at https://www.ftportfolios.com or by calling 1-800-988-5891.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240110392833/en/

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Source: First Trust Energy Income and Growth Fund

FAQ

What is the distribution per share declared by First Trust Energy Income and Growth Fund (FEN)?

The Fund has declared a quarterly distribution of $0.30 per share.

When will the distribution be payable to shareholders?

The distribution will be payable on January 31, 2024.

What is the distribution rate based on the January 9, 2024 NAV for First Trust Energy Income and Growth Fund (FEN)?

The distribution rate based on the January 9, 2024 NAV is 7.50%.

What is the distribution rate based on the January 9, 2024 closing market price for First Trust Energy Income and Growth Fund (FEN)?

The distribution rate based on the January 9, 2024 closing market price is 8.17%.

What does First Trust Energy Income and Growth Fund (FEN) focus on?

The Fund focuses on investing in MLPs and related public entities in the energy sector, aiming for high after-tax total return with an emphasis on current distributions paid to shareholders.