Understanding the iShares GNMA Bond ETF (GNMA)

What this ETF is trying to do

The iShares GNMA Bond ETF (ticker: GNMA) is an exchange-traded fund. While the specific holdings are not listed in this report, ETFs like this generally aim to provide exposure to certain types of bonds.

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. For GNMA, the year-to-date (YTD) price return is approximately -6.61%. The one-year price return is approximately -6.42%.

• Total Return: This includes the share price change plus any cash distributions paid out to investors. The YTD total return is approximately -3.55%, and the one-year total return is approximately -2.34%.

You can see that the total return numbers are higher than the price return numbers. This is because the cash distributions help offset some of the share-price decline. Looking further back, the three-year total return is approximately 14.11%, while the three-year price return is approximately 0.73%.

To visualize the price change, the current price is $41.60. The estimated price from roughly one year ago was approximately $44.45.

Income and distribution explanation

This ETF provides regular cash payments, known as distributions. The distribution yield is approximately 4.52%. These payments usually happen monthly, and there were 12 distributions over the last year.

It is important to remember that a high distribution yield does not mean you are earning that full amount as your total return. Total return is the most complete way 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. StockValueFinder uses an erosion-risk score to measure this risk.

GNMA has an erosion score of 75, which is labeled as "Mild price erosion." This is a measurement of risk and does not necessarily mean the fund's value has collapsed. There is no "severe erosion-risk flag" for this ETF.

Pros

• The ETF provides regular monthly cash distributions.

• The three-year total return has been positive at approximately 14.11%.

Cons

• The share price has seen a decline recently, with a negative one-year price return of approximately -6.42%.

• The five-year total return is approximately -1.43%.

Beginner takeaway

When studying GNMA, remember that the share price and the cash distributions tell different parts of the story. While the share price has gone down recently, the cash distributions help improve the "total return" figure. Always look at total return to get a better picture of performance, and keep an eye on erosion-risk scores to understand potential price trends.