ETF Education Report: PCM Fund Inc (PCM)

PCM Fund Inc (PCM) is an ETF that provides investors with regular cash distributions. While it offers a high distribution yield, the fund has experienced a significant decline in its share price over the last several years.

What the Numbers Show

The current price of PCM is $4.92. To understand how the price has changed, we can look at the price return (which only tracks the share price) and the total return (which includes distributions).

• Year-to-Date (YTD): The price return is -19.87%, while the total return is -11.39%.

• One Year: The price return is -26.46%, and the total return is -16.17%.

• Three Year: The price return is -46.75%, and the total return is -23.03%.

An estimated price from roughly one year ago was $6.69. For example, if an investor had put $10,000 into the share price alone one year ago, the price-only decline of -26.46% would mean the value of those shares would be approximately $7,354 today.

Income and Distribution Explanation

PCM is designed to provide frequent income. It usually pays distributions monthly, with 12 payouts occurring over the last year. The distribution yield is 15.66%, and the trailing distributions totaled $0.77 per share.

It is important for beginners to know that a high distribution yield can be misleading. A fund can pay out a high percentage of cash while the actual share price continues to fall. In this case, the total returns are lower than the price returns, meaning the distributions helped offset some of the price decline, but they did not stop the overall loss in value.

Price and 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, the price-based evidence is significant. PCM has a severe erosion-risk flag, which was triggered by the split-adjusted price trend and its erosion score. The fund has an erosion score of 30, which is labeled as "significant price erosion." This means the market price has dropped substantially over time.

Pros

• Frequent Income: The fund provides monthly cash distributions.

• High Yield: The distribution yield is high at 15.66%.

Cons

• Price Decline: The share price has fallen significantly over the short and long term.

• Negative Total Returns: Even when including distributions, the one-year, three-year, and five-year total returns are all negative.

• Low Income Grade: The fund has an income rating grade of "F."

Beginner Takeaway

PCM offers high monthly income, but this has come alongside a steady drop in share price. Income investors generally care about "principal stability," which means they want their original investment to stay steady while they collect checks. PCM has not shown principal stability, as evidenced by its severe erosion-risk flag and negative total returns.