This closed-end fund has a current annual dividend yield of 6.77%, paid quarterly.
First Trust Enhanced Equity Income Fund (FFA)
From Income Securities Investor
First Trust Enhanced Equity Income Fund; Current Annualized Yield 6.96%; Discount to Net Asset Value -7.42%; Pay Cycle 3e; Expense Ratio 1.14%; Leverage Ratio 0.00%; CUSIP 337318109; Family Closed-End Fund
First Trust Enhanced Equity Income Fund’s investment objective is to deliver a high level of current income and gains, in addition to capital appreciation. The fund is non-leveraged and four-star rated by Morningstar.
FFA invests substantially all of its managed assets in a diversified portfolio of U.S. common stocks, as well as U.S. dollar-denominated equity securities of non-U.S. issuers that trade on U.S. exchanges. The fund also writes or sells covered call options against a portion of its managed assets for added income.
The fund’s portfolio mix is appropriate, given economic times. As of 10/31/20, the fund’s portfolio breakdown for its five largest sectors consisted of Information Technology (30.9%), Health Care (14.6%), Communication Services (11.0%), Consumer Discretionary (10.9%), and Financials (10.1%). The top five holdings at the end of the same period were Microsoft (8.2%), Apple (7.0%), Thermo Fisher Scientific (3.1%), and JPMorgan (3.1%).
Total return performance has been historically solid, although returns in 2020 have been hurt by the COVID-19 pandemic’s impact on markets. FFA reported a YTD market price total return of +1.99% through 11/27/20. We believe this closed-end fund is suitable for low- to medium-risk portfolios over the intermediate-term. Distributions are taxed on a variable basis, but largely at the lower tax rate, reflecting the large component of qualified dividends and long-term capital gains. Buy up to $19.00.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, December 2020