A Tale of Two Energy ETFs: How EMLP and TAN Are Worlds Apart

Two distinct investment approaches dominate the sustainable energy sector: a concentrated solar strategy or a diversified infrastructure exposure. First Trust North American Energy Infrastructure Fund (EMLP) and Invesco Solar ETF (TAN) represent these contrasting investment philosophies. EMLP provides diversified exposure to utilities and pipelines with relatively low volatility, while TAN offers a more volatile bet on the global solar energy sector.

To illustrate the differences between these two popular investment vehicles, this report examines volatility, total return potential, dividend yield, expense ratio, and portfolio composition. First, investors should examine the investment strategies of EMLP and TAN. EMLP is an energy ETF focused on midstream energy stocks and utilities, holding approximately 60 stocks.

In contrast, TAN holds around 30 stocks, focusing on companies specializing in solar equipment, manufacturing, and generation. Historical performance reveals a significant gap between the two funds. Over the last five years, EMLP has generated a total return of 111%, with a 16.1% compound annual growth rate (CAGR). Conversely, TAN has delivered a total return of -58%, accompanied by a -16% CAGR.

Dividend income is another critical consideration. While TAN has not paid a dividend since 2024, EMLP boasts a dividend yield of 2.8%. Lastly, the expense ratio should be weighed. Although both funds are relatively costly, EMLP charges an annual expense ratio of 0.95%, while TAN's is 0.70%. However, the average expense ratio for the ETF universe stands at around 0.45%, indicating that both funds are relatively expensive compared to the market average.

In summary, EMLP and TAN are both energy ETFs, differing significantly in historical performance, dividend income, and portfolio composition. For investors seeking superior returns and income potential, EMLP's strong performance and higher dividend yield make it the preferred choice over TAN.