ETF Education Report: Western Asset High Income Fund II Inc (HIX)

What this ETF is trying to do

Western Asset High Income Fund II Inc (HIX) is an ETF listed on the NYSE. Based on its name and data, it focuses on providing income to 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 only tracks how much the share price changes.

• Total return includes both the share price changes and the cash distributions (dividends) paid out.

For HIX, the numbers show different trends depending on how long you look:

• Year-to-Date (YTD): The price return is approximately -14.90%. However, the total return is higher at -4.88%.

• One Year: The price return was approximately -18.43%, while the total return was -5.56%.

• Three Years: The price return was approximately -20.09%. Interestingly, the three-year total return is positive at 21.06%.

To visualize the price change, if you had invested in this ETF when its estimated price was $4.34 one year ago, the current price of $3.54 represents a significant share-price decline.

Income and distribution explanation

This ETF has a high distribution yield of approximately 16.61%. This means the fund pays out a large amount of cash relative to its share price. These distributions usually happen monthly, with Friday being the most common day for payments.

It is important to remember that a high distribution yield does not mean you have earned that percentage as a total return. You must look at the total return figures to see how the investment performed overall after including those cash payments.

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.

HIX has an erosion score of 55, which is labeled as "moderate price erosion." This indicates a moderate level of risk regarding the stability of the fund's value. While there is no "severe erosion-risk flag" for this ETF, the moderate score suggests that the share price has faced downward pressure.

Pros

• The fund provides a high distribution yield, which can provide regular cash income.

• Over a three-year period, the total return (which includes distributions) has been positive at 21.06%.

Cons

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

• There is a moderate erosion-risk score, suggesting the price has faced downward trends.

Beginner takeaway

High yields can be helpful for people looking for cash income, but they can also be misleading. A high yield often exists alongside a falling share price. Always look at the total return to see if the cash you receive is helping to make up for the decline in the share price.