ETF Education Report: GraniteShares HIPS US High Income ETF (HIPS)

What this ETF is trying to do

The GraniteShares HIPS US High Income ETF (HIPS) is an exchange-traded fund designed to provide income. It holds a variety of different investments, including several partnerships and corporations. Because it focuses on "high income," it aims to pay out regular cash to its investors.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price. For HIPS, the share price has been declining. The one-year price return was approximately -6.59%, and the year-to-date (YTD) price return was approximately -4.11%.

• Total Return: This measures the share price change *plus* the money paid out in distributions. Because this ETF pays out a lot of cash, its total return is higher than its price return. For example, the one-year total return was approximately 4.25%, and the YTD total return was approximately 3.19%.

To visualize this, an estimated price from roughly one year ago was $11.99. The current price is $11.20.

Income and distribution explanation

This ETF has a high distribution yield of approximately 11.52%. This means the cash distributions are large compared to the ETF's price. These payments usually happen monthly, with 12 payouts recorded over the last year. While high yields can provide regular cash, they do not guarantee that your original investment will stay the same value.

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. HIPS has an erosion score of 75, which is labeled as "mild price erosion." This indicates that while the share price has been dropping, it has not triggered a severe erosion-risk flag.

Top Holdings

The following are the top holdings in this ETF (note that this is a partial list):

• Dorchester Minerals LP (3.52%)

• Plains All American Pipeline LP (3.45%)

• CVR Partners LP (3.35%)

• Delek Logistics Partners LP (3.20%)

• Western Midstream Partners LP (3.05%)

• Kimbell Royalty Partners LP (3.02%)

• Enterprise Products Partners LP (2.88%)

• Alliance Resource Partners LP (2.87%)

• Black Stone Minerals LP (2.87%)

• FS KKR Capital Corp (2.86%)

Pros

• Provides a high distribution yield for investors seeking regular cash.

• The total return has remained positive over the one-year and year-to-date periods, even though the share price fell.

Cons

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

• There is a "mild" erosion-risk score, meaning the share price has been trending downward.

Beginner takeaway

High yields can be helpful for people who want regular cash, but it is important to look at the "total return." A high distribution yield can sometimes hide a falling share price. Always check if the total return (which includes the cash paid to you) is meeting your goals.