ETF Education Report: HYGV

What this ETF is trying to do

The FLEXSHARES High Yield Value-Scored Bond Index Fund (HYGV) is an exchange-traded fund (ETF). Based on its name, it focuses on high-yield bonds. Bonds are essentially loans made to companies or governments that pay interest over time.

What the numbers show

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

• Price Return: This measures only the change in the share price. For HYGV, the one-year price return was approximately -4.64%. This means the share price went down over that period.

• Total Return: This includes both the share price changes and the money paid out through distributions. For HYGV, the one-year total return was approximately 2.58%.

Because the total return is higher than the price return, it shows that the distributions helped offset some of the share-price decline. Looking further back, the three-year total return was approximately 24.80%, while the three-year price return was approximately -1.44%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $41.25, and the current price is $39.34.

Income and distribution explanation

This ETF provides regular cash payments, known as distributions. The distribution yield is approximately 7.51%. This number describes the cash payments relative to the current ETF price. HYGV usually pays these out monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as total return. Total return is the most accurate way to see how much value was actually gained or lost.

NAV erosion explanation

"NAV erosion" refers to a situation where the value of the underlying assets in the fund decreases over time. While a falling share price can sometimes look like erosion, they are not always the same thing.

StockValueFinder uses an "erosion-risk score" to measure this risk. HYGV has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag for this fund.

Pros

• The fund has a high income rating grade of "A."

• The total returns over one, three, and five years have been positive, even when the share prices themselves were down.

Cons

• The share price has experienced declines over the one-year and year-to-date periods.

Beginner takeaway

For new investors, HYGV shows how distributions can impact the overall performance of an investment. Even when the share price goes down (a price return loss), the total return can remain positive if the cash distributions are large enough to make up for that decline. Always look at total return rather than just the share price or the yield alone to get the full picture.