What happened
The First Trust Dynamic Europe Equity Income Fund (FDEU -0.81%) is up 10.5% this week as of the opening bell on Friday morning, according to S&P Global Market Intelligence. The fund is trading at about $12.30 per share as of Friday’s open, up about 9% year to date.
Overall, the markets ticked up slightly this week, as the S&P 500 gained 0.8%, the Dow Jones Industrial Average was up 0.8%, and the Nasdaq Composite climbed 1.3% this week, as of the opening bell on Friday.
So what
The First Trust Dynamic Europe Equity Income Fund made news this week, as the board at First Trust Advisors (FTA) approved its reorganization from a closed-end fund to an exchanged-traded fund (ETF). It is an actively managed ETF that will remain managed by FTA and sub-advised by Janus Henderson.
The assets of the fund will be transferred to the new ETF, and shareholders of FDEU would receive shares of the new ETF with a value equal to the aggregate net asset value of the FDEU shares held by them. The reorganization is expected to be completed in 2023, subject to shareholder and regulatory approvals.
The fund invests at least 80% of its assets in a portfolio of equity securities of European companies of any market capitalization. The objective is to provide a high level of current income, with a secondary focus on capital appreciation. Holdings include common and preferred stocks that pay dividends, depositary receipts, and real estate investment trusts (REITs).
The top three holdings are Sanofi SA, Nestlé SA, and BHP Group. About 31.5% of the stocks are from the United Kingdom, while 19.6% are from France, and 13.9% are from Switzerland.
As of March 23, it paid out a monthly dividend of $0.07 at a distribution rate of 6.84%. The fund is up 9% year to date as of March 24, and over the past one-year period it is down 0.7%. Since inception in 2015, it has an average annual return of 3.5%, through Feb. 28.
Now what
This ETF pays a high distribution rate, which is the amount of the recent distribution divided by the most recent market price. It won’t generate much in the way of long-term capital appreciation, but it does offer some downside protection in volatile markets.
If you are looking to diversify your portfolio of income stocks with one that taps into the best European dividend stocks, this might be an investment to consider.
