WHEATON, Ill.--(BUSINESS WIRE)--First Trust MLP and Energy Income Fund (the "Fund") (NYSE: FEI) has decreased its regularly scheduled monthly common share distribution to $0.10 per share from $0.1183 per share. The distribution will be payable on September 17, 2018, to shareholders of record as of September 5, 2018. The ex-dividend date is expected to be September 4, 2018. The monthly distribution information for the Fund appears below.
First Trust MLP and Energy Income Fund (FEI):
|Distribution per share:||$0.10|
|Distribution Rate based on the August 17, 2018 NAV of $13.56:||8.85%|
|Distribution Rate based on the August 17, 2018 closing market price of $13.57:||8.84%|
|Decrease from previous distribution of $0.1183:||-15.47%|
It is anticipated that, due to the tax treatment of cash distributions made by master limited partnerships ("MLPs") in which the Fund invests, a portion of the 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 2018 will be made after the end of 2018 and will be provided on Form 1099-DIV.
The Fund’s monthly common share distribution is being reduced by 15.47% from $0.1183 per share to $0.10 per share. This reduction reflects three factors that have lowered the Fund’s distributable cash flow: 1) Portfolio companies lowering dividend payout ratios, 2) reduced Fund borrowings, and 3) lower market volatility limiting the Fund’s ability to augment income via its covered call strategy.
The Alerian MLP Index is down 46% from its high in the third quarter of 2014. Lower unit prices and attendant higher equity financing costs are driving most MLP-structured companies toward self-financing of growth by retaining cash through lower or slower-growing cash distributions to investors. Structural simplifications, including acquisitions of lower-valued MLP subsidiaries by C-corp parents, have also contributed to lower dividend yields. For FEI this has resulted in lower dividend receipts from portfolio companies despite generally higher per-share distributable cash flow.
Since the third quarter of 2014, lower unit prices also necessitated a 38% reduction in the Fund’s borrowing level. These borrowings have historically enhanced the Fund’s cash flows through the purchase of higher yielding securities such as MLP’s, pipeline corporations and utilities. As such, reduced borrowings have also negatively affected the Fund’s cash flows.
The Fund is a non-diversified, closed-end management investment company that seeks to provide a high level of total return with an emphasis on current distributions paid to common shareholders. The Fund seeks to provide its common shareholders with a vehicle to invest in a portfolio of cash-generating securities, with a focus on investing in publicly-traded MLPs and MLP-related entities in the energy sector and energy utilities industries. Under normal market conditions, the Fund invests at least 85% of its managed assets in equity and debt securities of MLPs, MLP-related entities and other energy sector and energy utilities companies. To generate additional income, the Fund expects to write (or sell) covered call options on up to 35% of its managed assets. 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 $130 billion as of July 31, 2018 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 July 31, 2018, EIP managed or supervised approximately $6.3 billion in client assets.
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.
Principal Risk Factors: The risks of investing in the Fund are spelled out in the prospectus, shareholder reports and other regulatory filings.
The Fund is subject to risks, including the fact that it is a non-diversified closed-end management investment company.
Because the Fund is concentrated in securities issued by MLPs, MLP-related entities, and other energy and utilities companies, 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 invests in securities of non-U.S. issuers which are subject to higher volatility than securities of U.S. issuers. Because the Fund invests in non-U.S. securities, you may lose money if the local currency of a non-U.S. market depreciates against the U.S. dollar.
Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.
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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan 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 www.ftportfolios.com or by calling 1-800-988-5891.