ETF Education Report: BlackRock Credit Allocation Income Trust (BTZ)

What this ETF is trying to do

BlackRock Credit Allocation Income Trust (BTZ) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the data, this type of fund is generally designed to provide income to its investors.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price. For BTZ, the one-year price return was approximately -14.97%. The year-to-date (YTD) price return was approximately -12.93%.

• Total Return: This is a more complete measure because it includes the impact of distributions (cash paid out to investors). For BTZ, the one-year total return was approximately -6.32%, and the YTD total return was approximately -6.26%.

You can see that the total return is higher than the price return. This is because the cash distributions helped offset some of the share-price decline.

Looking further back, the three-year total return was approximately 27.57%, even though the three-year price return was -4.17%. This shows how much the distributions contributed to the overall value over that time.

To visualize the price change, if you had bought one share roughly one year ago at the estimated price of $11.09, the current price is $9.43.

Income and distribution explanation

BTZ has a distribution yield of approximately 10.68%. This means the fund pays out a significant amount of cash relative to its share price. These distributions usually happen monthly, and over the last 12 months, there were 12 payouts.

It is important to remember that a high distribution yield does not mean you are earning that percentage as your total return. As shown in the numbers above, even with a high yield, the total return can still be negative if the share price drops significantly.

NAV erosion explanation

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

BTZ has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk, not a guarantee that the fund's value has collapsed. There is no "severe erosion-risk flag" for this ETF.

Pros

• The fund provides a high distribution yield of approximately 10.68%.

• It has a history of providing monthly distributions.

• The three-year total return was positive at approximately 27.57%.

Cons

• The fund has experienced share-price declines (negative price returns) over the last year and year-to-date.

• The erosion-risk score indicates "mild price erosion."

Beginner takeaway

When looking at high-yield ETFs like BTZ, it is vital to look at both the price return and the total return. A high distribution yield can provide cash income, but it does not protect you from a falling share price. Always check the total return to see how much of your investment value is being affected by price changes versus how much is being returned to you through distributions.