What this ETF is trying to do

The iShares iBoxx $ High Yield Corporate Bond ETF (ticker: HYG) is an exchange-traded fund (ETF). This type of investment focuses on high-yield corporate bonds. In simple terms, it invests in debt from companies that offer higher interest rates than standard bonds.

What the numbers show

To understand how this ETF has performed, we can look at two different types of returns: price return and total return.

The current price of HYG is $78.53. The estimated price from roughly one year ago was $81.23. This shows a share-price decline of about -3.32% over the last year.

However, the "total return" tells a different story because it includes the cash paid out to investors (distributions). The one-year total return was approximately 2.56%. Over a longer period, the three-year price return was 5.14%, while the three-year total return was much higher at 25.63%. Looking even further back, the five-year total return was 18.20%.

Income and distribution explanation

HYG is designed to provide regular cash payments to investors. It has a distribution yield of about 6.03%. This means that for every dollar the ETF is worth, it pays out roughly 6 cents in distributions. These payments usually happen on a monthly basis.

It is important to remember that a high distribution yield does not automatically mean an investor will earn that percentage as their total return. While these payments provide cash income, they do not guarantee that the original amount invested (the principal) will stay the same. Sometimes, a fund can pay out a lot of cash while the share price at the same time goes down.

NAV erosion explanation

NAV erosion is a term used to describe when the value of the underlying assets in an ETF drops over time. StockValueFinder uses an "erosion score" to measure this risk.

For HYG, the erosion score is 94. This is labeled as "Stable / sideways," and the severity is rated as "good." Because there is no severe erosion-risk flag, the data suggests that the fund has not shown signs of significant price deterioration or a collapsing value of its underlying assets based on these specific measurements.

Pros

• The ETF provides regular monthly distributions to investors.

• It has shown positive total returns over both three-year and five-year periods.

• The erosion score indicates that the fund's value is currently considered stable or sideways.

Cons

• The share price has experienced a decline of about -3.32% over the last year.

• The current price ($78.53) is lower than the estimated price from one year ago ($81.23).

Beginner takeaway

When looking at HYG, it is helpful to see both the share-price movement and the total return. While the share price has gone down slightly over the last 12 months, the total return remains positive because of the distributions paid out. For income investors, understanding the difference between a high distribution yield and the actual total return is very important for seeing the full picture.