ETF Education Report: Delaware Investments Dividend and Income Fund Inc (DDF)

What this ETF is trying to do

The Delaware Investments Dividend and Income Fund Inc (DDF) is an ETF traded on the NYSE. While the specific investment strategy is not detailed in the provided data, the name suggests a focus on dividends and income.

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 any distributions (cash payments) received.

According to the data:

• Year-to-Date (YTD): The YTD price return is approximately -10.95%. However, the YTD total return is -9.68%.

• One Year: The one-year price return was approximately -31.44%. The one-year total return was approximately -23.68%.

• Three Years: The three-year price return was approximately -35.99%, while the three-year total return was approximately -14.01%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $10.56. The current price is $7.24. If you had invested $10,000 into this ETF one year ago based on these prices alone, your investment would have dropped to approximately $6,856 before accounting for any cash distributions.

Income and distribution explanation

This ETF has a distribution yield of approximately 12.70%. This means the fund pays out a significant amount of cash relative to its share price. These distributions usually happen monthly, with 12 payments made over the last year.

It is vital to remember that a high distribution yield does not mean you are earning that percentage as your total return. High cash payments can exist even when the share price is falling.

NAV erosion explanation

This ETF has a "severe erosion-risk flag." The data shows an erosion score of 30, which is labeled as "significant price erosion."

"NAV erosion" refers to a decline in the value of the fund's underlying assets. While a falling market price is a "share-price decline," significant and lasting drops in price often signal erosion-risk. When an ETF's share price falls from a high point (like $10.56) to a much lower point (like $7.24), it can destroy the principal—the original amount of money you invested. Income investors often prefer funds where the price stays steady or goes up slightly, because if the price collapses, the high cash payments may not be enough to make up for the lost investment value.

Pros

• The fund provides a high distribution yield of approximately 12.70%.

• Distributions are frequent, occurring usually on a monthly basis.

Cons

• The ETF has experienced significant share-price declines over the one-year and three-year periods.

• There is a severe erosion-risk flag present.

• The total return has been negative over the one-year and three-year periods.

Beginner takeaway

When looking at ETFs, a high yield can be misleading if the share price is dropping quickly. Always look at the "total return" to see how much value you are actually gaining or losing after both price changes and cash payments are considered.