First Trust Enhanced Equity Income Fund Declares its Quarterly Distribution of $0.315 Per Share

Rhea-AI Summary

First Trust Enhanced Equity Income Fund (FFA) declares a quarterly distribution of $0.315 per share, payable on March 28, 2024. The distribution rate based on NAV is 6.44% and based on the closing market price is 6.75%. The Fund's managed distribution policy aims to distribute long-term capital gains more frequently.

Insights

Financial Analyst

The declaration of a quarterly distribution of $0.315 per share by the First Trust Enhanced Equity Income Fund (FFA) signifies a direct cash flow to shareholders, which is a critical component in assessing the Fund's yield. The distribution rate based on the NAV and closing market price indicates a substantial yield, well above the average money market funds or short-term bonds, making it an attractive option for income-focused investors. However, the sustainability of such a high payout ratio should be scrutinized, especially in relation to the Fund's earnings and paid-out capital gains.

Investors should consider the implications of the managed distribution policy, particularly the aspect of distributing long-term capital gains throughout the year. While this could potentially smooth out income streams and provide tax planning advantages, it also raises questions about the impact on the Fund's net asset value over time. If the distributions are not fully covered by income and realized gains, the Fund could be returning capital, which may not be sustainable in the long run.

Tax Advisor

From a tax perspective, the Fund's approach to distributing long-term capital gains quarterly rather than annually can have significant implications for shareholders. This distribution strategy might alter the timing of tax liabilities for investors, as capital gains are typically subject to taxes in the year they are received. Shareholders should evaluate their individual tax situations, considering the potential for the managed distribution policy to accelerate tax obligations.

Additionally, it is important for shareholders to understand the composition of the distributions they receive. If the distributions include a return of capital, this could reduce an investor's cost basis in the Fund and consequently increase the capital gains tax owed when shares are eventually sold. Shareholders may need to adjust their tax planning strategies accordingly.

Market Research Analyst

Examining the distribution rate in relation to the Fund's net asset value (NAV) and market price provides insight into the market's perception of the Fund's valuation. A higher distribution rate relative to the market price, as indicated by the 6.75%, suggests that the Fund may be undervalued, or that investors are requiring a higher yield to compensate for perceived risks. This could be due to market volatility, sector-specific risks, or the Fund's own performance history.

It is also important to monitor how the market reacts to the distribution announcement. If the Fund's market price adjusts significantly after the ex-dividend date, it may indicate investor sentiment about the sustainability of the distributions or the overall health of the Fund. Long-term trends in the Fund's market price relative to its NAV will be telling of the market's confidence in the Fund's management and strategy.

WHEATON, Ill.--(BUSINESS WIRE)-- First Trust Enhanced Equity Income Fund (the "Fund") (NYSE: FFA) has declared the Fund's regularly scheduled quarterly distribution of $0.315 per share. The distribution will be payable on March 28, 2024, to shareholders of record as of March 25, 2024. The ex-dividend date is expected to be March 22, 2024. The quarterly distribution information for the Fund appears below.

First Trust Enhanced Equity Income Fund (FFA):
Distribution per share:										$0.315
Distribution Rate based on the March 8, 2024 NAV of $19.58:										6.44%
Distribution Rate based on the March 8, 2024 closing market price of $18.67:										6.75%

The Fund's Board of Trustees has approved a managed distribution policy for the Fund (the "Plan") in reliance on exemptive relief received from the Securities and Exchange Commission which permits the Fund to make periodic distributions of long-term capital gains more frequently than otherwise permitted with respect to its common shares subject to certain conditions. Under the Plan, the Fund intends to pay a quarterly distribution in the amount of $0.315 per share. A portion of this quarterly distribution may include long-term capital gains. This may result in a reduction of the long-term capital gain distribution necessary at year end by distributing long-term capital gains throughout the year. The annual distribution rate is independent of the Fund's performance during any particular period. Accordingly, you should not draw any conclusions about the Fund's investment performance from the amount of any distribution or from the terms of the Plan.

This distribution will consist of net investment income earned by the Fund and return of capital and may also consist of net short-term realized capital gains. 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 diversified, closed-end management investment company that seeks to provide a high level of current income and gains and, to a lesser extent, capital appreciation. The Fund seeks to achieve its investment objective by investing in a diversified portfolio of equity securities.

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 $218 billion as of February 29, 2024 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.

Chartwell Investment Partners, LLC ("Chartwell") serves as the Fund's investment sub-advisor and is an investment firm focusing on institutional, sub-advisory, and private client relationships. The firm is a research-based equity and fixed-income manager with a disciplined, team-oriented investment process. As of December 31, 2023, Chartwell had approximately $11.4 billion in assets under management.

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.

Market risk is the risk that a particular investment, or shares of a fund in general may fall in value. Investments held by the Fund are subject to market fluctuations caused by real or perceived adverse economic conditions, political events, regulatory factors 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, market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition of sanctions and other similar measures, spread of infectious disease or other public health issues, recessions, natural disasters or other events could have significant negative impact on a fund and its investments.

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.

Shares of closed-end investment companies such as the Fund frequently trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset value.

The Fund may write (sell) covered call options on all or a portion of the equity securities held in the Fund's portfolio. The use of options may require the Fund to sell portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold an equity security that it might otherwise sell.

Premiums from writing (selling) call options and dividends and interest payments made by the securities in the Fund's portfolio can vary widely over time.

An adverse event affecting an issuer of equity securities, such as an unfavorable earnings report, may depress the value of a particular equity security held by the Fund. Also, the prices of equity securities are sensitive to general movements in the stock market and a drop in the stock market may depress the prices of equity securities to which the Fund has exposure. There is no guarantee that the issuers of the equity securities in which the Fund invests will declare dividends in the future or that if declared they will remain at current levels. There can be no assurance as to what portion of the distributions paid to the Fund's Common Shareholders will consist of tax-advantaged qualified dividend income.

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.

The Fund may not invest 25% or more of its total assets in securities of issuers in any single industry. If the Fund is focused in an industry, it may present more risks than if it were broadly diversified over numerous industries of the economy.

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 New York Stock Exchange 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/20240311442219/en/

Press Inquiries: Ryan Issakainen, 630-765-8689

Analyst Inquiries: Jeff Margolin, 630-915-6784

Broker Inquiries: Sales Team, 866-848-9727

Source: First Trust Enhanced Equity Income Fund

FAQ

What is the quarterly distribution amount declared by First Trust Enhanced Equity Income Fund (FFA)?

The quarterly distribution declared by First Trust Enhanced Equity Income Fund (FFA) is $0.315 per share.

When will the quarterly distribution be payable to shareholders of First Trust Enhanced Equity Income Fund (FFA)?

The quarterly distribution will be payable on March 28, 2024, to shareholders of First Trust Enhanced Equity Income Fund (FFA) who are recorded as of March 25, 2024.

What is the distribution rate based on the NAV for First Trust Enhanced Equity Income Fund (FFA)?

The distribution rate based on the March 8, 2024 NAV of $19.58 for First Trust Enhanced Equity Income Fund (FFA) is 6.44%.

What is the distribution rate based on the closing market price for First Trust Enhanced Equity Income Fund (FFA)?

The distribution rate based on the March 8, 2024 closing market price of $18.67 for First Trust Enhanced Equity Income Fund (FFA) is 6.75%.

What is the managed distribution policy implemented by First Trust Enhanced Equity Income Fund (FFA)?

First Trust Enhanced Equity Income Fund (FFA) has implemented a managed distribution policy that allows for more frequent distributions of long-term capital gains under certain conditions.