ETF Education Report: Franklin Universal Trust (FT)

What this ETF is trying to do

Franklin Universal Trust (FT) is an Exchange Traded Fund (ETF) listed on the NYSE. While the specific investment goals are not detailed in the data, ETFs are tools used by investors to access a collection of different assets through a single ticker symbol.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the share price changes and any cash distributions (dividends) paid out.

For FT, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -11.38%, while the total return is approximately -6.99%.

• One Year: The price return is approximately -11.49%, while the total return is approximately -5.62%.

• Three Years: The price return is approximately 8.24%, while the total return is much higher at approximately 33.21%.

• Five Years: The five-year total return is approximately 21.06%.

To visualize the one-year price change, an investor's share price would have started at an estimated $8.01 one year ago and moved to the current price of $7.09.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 7.19%. This number describes the cash paid out relative to the current ETF price. The trailing distributions were $0.51, and the fund usually pays these out monthly (with 12 payments in the last year).

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

NAV erosion explanation

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

FT 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 ETF.

Pros

• The fund has a history of positive total returns over three-year and five-year periods.

• It provides regular monthly cash distributions.

Cons

• The share price has seen a decline over the last year and year-to-date.

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

Beginner takeaway

When looking at ETFs like FT, always look at the total return rather than just the price or just the yield. The total return tells you how the share price and the cash payments worked together. Also, remember that while high distributions provide cash, they do not guarantee that the share price will stay stable.