ETF Education Report: Blackrock Floating Rate Income Strategies Fund Inc (FRA)

What this ETF is trying to do

The Blackrock Floating Rate Income Strategies Fund Inc (FRA) is an ETF listed on the NYSE. While specific investment goals are not detailed in the data, the name suggests it focuses on income strategies using floating rate assets.

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 through distributions.

• Year-to-Date (YTD): The price return is approximately -10.95%. However, the YTD total return is -1.55%.

• One Year: The price return was approximately -18.87%, while the one-year total return was -7.54%.

• Three Years: The price return was approximately -16.01%, but the three-year total return was 20.12%.

To visualize the price change, if you had bought one share at the estimated price from roughly one year ago ($12.93), that single share would now be worth $10.49.

Income and distribution explanation

This ETF has a high distribution yield of approximately 14.16%. This means the fund pays out a significant amount of cash relative to its share price. These distributions usually happen monthly, with Friday being the most common day for payouts. Over the last 12 months, there were 12 distributions totaling approximately $1.49 per share.

Investors should remember that a high yield does not guarantee you will make money overall. As seen in the one-year data, even with high distributions, 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. This ETF has an erosion score of 55, which is labeled as "moderate price erosion." While there is no severe erosion-risk flag present, the data indicates moderate price deterioration.

Pros

• The fund provides a high distribution yield of approximately 14.16%.

• It has shown a positive total return over a three-year period of 20.12%.

Cons

• The share price has seen declines in the one-year and three-year price return categories.

• The erosion-risk score indicates moderate price erosion.

Beginner takeaway

When looking at high-yield ETFs like FRA, it is vital to look at the total return, not just the distribution yield. A high payout can provide cash, but if the share price falls faster than the payouts, the total value of the investment may still go down. Always distinguish between the cash you receive and the actual change in your principal investment.