ETF Education Report: Western Asset Mortgage Opportunity Fund Inc (DMO)

What this ETF is trying to do

Western Asset Mortgage Opportunity Fund Inc (DMO) is an ETF traded on the NYSE. While the specific investment strategy is not detailed in the provided data, ETFs like this generally aim to provide investors with exposure to specific market opportunities.

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 moves. Total return includes both the price movement and the cash distributions paid out to investors.

Based on the data provided:

• Year-to-Date (YTD): The price return is approximately -14.20%. However, the YTD total return is -5.06%.

• One Year: The one-year price return is approximately -20.65%. The one-year total return is approximately -9.28%.

• Three Year: The three-year price return is approximately -11.72%. Interestingly, the three-year total return is 30.97%.

To visualize the price change, an investor's share price was estimated to be roughly $11.96 one year ago, compared to the current price of $9.49.

Income and distribution explanation

This ETF has a high distribution yield of approximately 16.75%. Distributions are the cash payments made to shareholders. For this ETF, the trailing distributions were $1.59. These payments usually happen monthly, with 13 payments recorded over the last year.

It is vital to remember that a high distribution yield does not mean an investor earned that same percentage as a total return. Total return is the more complete picture of how much value was gained or lost.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price does not always mean the NAV is dropping, we use an "erosion-risk score" to measure this risk.

DMO has an erosion score of 55, which is labeled as "Moderate price erosion." This indicates a moderate level of risk regarding price deterioration.

Pros

• The ETF offers a high distribution yield of approximately 16.75%.

• Over a three-year period, the total return was positive at 30.97%, even though the share price itself declined during that time.

Cons

• The ETF has experienced a significant share-price decline over the last year (-20.65%).

• There is a moderate erosion-risk score of 55.

Beginner takeaway

When looking at high-yield ETFs, it is important to look at more than just the distribution yield. A very high yield can sometimes exist even while the share price is falling. Always compare the "price return" to the "total return" to see how much of your investment value is being affected by price changes versus how much you are receiving in cash.