Understanding the VANECK MORTGAGE REIT INCOME ETF (MORT)

What this ETF is trying to do

The VANECK MORTGAGE REIT INCOME ETF, known by its ticker symbol MORT, is an exchange-traded fund that focuses on mortgage real estate investment trusts (REITs). This ETF holds a collection of different companies. According to the top holdings provided, some of these include Annaly Capital Management Inc (19.45%) and AGNC Investment Corp (15.24%). Because these holdings can change over time, it is important to check the most recent data regularly.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price. For MORT, the year-to-date (YTD) price return is approximately -17.03%. The one-year price return was approximately -18.58%.

• Total Return: This includes the share price change plus any cash distributions (dividends) paid out. The YTD total return is approximately -10.31%, and the one-year total return is approximately -6.02%.

You can see that the total return numbers are different from the price return numbers because they account for the cash paid to investors. For example, over the last three years, while the price return was approximately -24.89%, the total return was actually positive at approximately 8.91%.

Income and distribution explanation

This ETF is known for its distribution yield, which is currently approximately 17.03%. This number describes the cash distributions relative to the ETF's price. The trailing distributions are approximately $1.48 per share. These payments usually happen quarterly.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as a total return. High yields can sometimes be misleading if the share price is also falling.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling market price does not always mean the NAV has declined, we use an erosion-risk score to measure this risk.

MORT has an erosion score of 55, which is labeled as "Moderate price erosion." This means there has been a moderate level of price deterioration. However, the fund does not currently have a "severe erosion-risk flag."

Pros

• High Distribution Yield: The ETF provides a high level of cash distributions.

• Positive Three-Year Total Return: When including distributions, the three-year total return has been positive at approximately 8.91%.

Cons

• Share-Price Decline: The ETF has experienced significant declines in its share price over the last year and year-to-date.

• Moderate Erosion Risk: The erosion score indicates moderate price deterioration.

Beginner takeaway

When looking at ETFs like MORT, always distinguish between the share price and the total return. A high distribution yield can provide cash income, but it does not guarantee that your original investment (the principal) will stay the same value. Always look at the total return to see how much you might have actually gained or lost after all distributions are considered.