ETF Education Report: BlackRock California Municipal Income Trust (BFZ)

What this ETF is trying to do

The BlackRock California Municipal Income Trust (ticker: BFZ) is an ETF traded on the NYSE. While specific investment goals are not listed in the data, municipal income funds generally focus on providing income through investments related to local government entities.

What the numbers show

It is important to understand the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and the money paid out to investors through distributions.

Here is what the data shows for BFZ:

• Year-to-Date (YTD): The price return is approximately 3.45%. However, the YTD total return is higher at 4.40%.

• One-Year: The one-year price return was approximately -1.86%. This means the share price went down. However, the one-year total return was 5.07%.

• Three-Year: The three-year price return was approximately -1.59%, while the three-year total return was 16.49%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was approximately $11.32. The current price is $11.11. If you had invested $10,000 based only on the share price, your investment would have decreased in value before considering any cash payments received.

Income and distribution explanation

This ETF has a distribution yield of approximately 6.68%. This represents the cash distributions relative to the ETF's price. The trailing distributions over the last year were approximately $0.74 per share. These payments usually happen monthly, with Friday being the most common day for payouts.

It is important to remember that a high distribution yield does not mean the investor earned that exact percentage as their total return. Distributions provide cash income, but they do not guarantee that your original investment (your principal) will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. We use an "erosion-risk score" to measure this risk.

For BFZ, the erosion-risk score is 94. The data labels this as "Stable / sideways" and describes the erosion severity as "good." There is no severe erosion-risk flag for this ETF.

Pros

• The total return figures (which include distributions) have been positive over the one-year and three-year periods, even when the share price itself was down.

• The erosion-risk measurements suggest a stable profile.

Cons

• The share price has seen declines over the one-year and three-year periods.

• High distribution yields can sometimes be misleading if the share price is also falling.

Beginner takeaway

When looking at ETFs that pay regular income, always look at the total return, not just the distribution yield or the price change. A fund might pay you cash, but if the share price drops significantly, it can impact your overall investment. In this case, while the share price has fluctuated, the total return has remained positive over the measured periods.