What this ETF is trying to do

The Defiance Leveraged Long Income HOOD ETF (HOOI) is an exchange-traded fund designed to provide income by using a leveraged strategy and option-income methods. Because it is "leveraged," the fund uses financial tools to try to increase the size of its market moves. It also uses options, which are contracts that can generate extra cash payments for the fund's holders.

What the numbers show

The data shows that HOOI has experienced a significant share-price decline over the last year. The estimated price from roughly one year ago was $26.96. Today, the current price is $10.05.

Over the past year, the share-price return was -62.72%. When you include the distributions (the cash paid out to investors), the total return for that same period was -53.11%. For this year so far (YTD), the price return is -13.61%, and the total return is -10.24%.

Income and distribution explanation

HOOI provides a high distribution yield of 40.47%. The fund pays out distributions "usually monthly," with 16 payments made over the last 12 months. While these payouts provide regular cash, it is important to understand that a high distribution yield does not automatically mean an investor's total investment value is growing. In this case, the share price has dropped significantly even though the fund pays out large distributions.

NAV erosion explanation

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion. However, there is clear evidence of "severe price erosion" based on the share price. StockValueFinder assigned this ETF an erosion score of 10 with a "severe" severity rating. This indicates that the fund's market price has declined very quickly. A severe erosion-risk flag is active because of this trend and the low erosion score.

Pros

• Provides frequent distributions, usually on a monthly basis.

• Offers a high distribution yield for investors seeking regular cash flow.

Cons

• The fund is leveraged, which can increase the risk of large price swings.

• It has experienced a very large share-price decline over the last year.

• It received an "F" grade for its income rating score.

Beginner takeaway

HOOI is a high-yield fund that pays out cash monthly, but it has seen its share price drop by more than 60% in just one year. Because it is leveraged and shows signs of severe price erosion, the value of the shares has decreased significantly despite the large payouts.