ETF Education Report: Flaherty & Crumrine Preferred and Income Securities Fund Inc (FFC)

What this ETF is trying to do

FFC is an Exchange Traded Fund (ETF) listed on the NYSE. Based on its name, this fund focuses on preferred and income securities. Investors often look at these types of funds when they are looking for regular cash payments.

What the numbers show

It is important to understand that "price return" and "total return" tell different stories. Price return only tracks how the share price changes. Total return includes both the price change and the cash distributions paid out to investors.

Here is what the data shows for FFC:

• Year-to-Date (YTD): The price return is approximately -8.60%. However, the total return is -3.20%.

• One Year: The price return was approximately -10.39%, while the total return was approximately -3.19%.

• Three Year: The price return was approximately 15.46%, and the total return was much higher at approximately 43.91%.

To visualize the price change, if you had invested in this ETF one year ago, the estimated price was roughly $16.84 per share. The current price is $15.09.

Income and distribution explanation

This ETF has a distribution yield of approximately 8.26%. This number describes the cash distributions relative to the current ETF price. The fund usually pays out money monthly, with 12 payments recorded over the last year.

While a high yield can provide cash income, it is important to remember that a high distribution yield does not mean the investor earned that same percentage as their total return. You must look at the total return to see how the investment performed overall.

NAV erosion explanation

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

FFC has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not necessarily prove that the Net Asset Value (NAV) has collapsed. There is no "severe erosion-risk flag" for this fund.

Pros

• The fund has a history of providing regular monthly distributions.

• Over a three-year period, the total return was positive at approximately 43.91%.

Cons

• The share price has seen a decline recently, with negative price returns for both the year-to-date and one-year periods.

• The fund shows a "mild" erosion-risk score.

Beginner takeaway

When looking at funds like FFC, always distinguish between the share price and the total return. A fund might have a falling share price but still provide cash through distributions. However, high yields can sometimes be accompanied by a declining share price, so it is important to look at the total return to see the full picture.