ETF Education Report: Flaherty & Crumrine Preferred and Income Fund Inc (PFD)

What this ETF is trying to do

PFD is an Exchange Traded Fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the data, it is categorized as an asset type designed to provide income.

What the numbers show

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

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the share price changes and the money paid out through distributions.

For PFD, the numbers show different trends depending on how much time has passed:

• Year-to-Date (YTD): The price return is approximately -7.25%. However, the total return is higher at -2.74%.

• One Year: The price return was approximately -9.16%, while the total return was approximately -2.51%.

• Three Years: The performance looks much stronger over a longer period. The price return was approximately 16.63%, and the total return was approximately 43.18%.

To visualize the price change over the last year, we can use an estimated starting price. If you had invested in a share roughly one year ago when the estimated price was $12.12, and the current price is $11.01, the share price has declined.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 7.45%. This means the fund pays out a significant amount of cash relative to its share price.

The fund usually pays these distributions monthly, with Friday being the most common day for payments. Over the last 12 months, it has made 12 payments. It is important to remember that a high distribution yield does not guarantee that an investor will earn that same percentage as a total return.

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 share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

PFD has an erosion-risk score of 75, which is labeled as "mild price erosion." This is a measurement of risk and is not a "severe erosion-risk flag."

Pros

• The fund has shown strong total returns over a three-year period (approximately 43.18%).

• It provides regular monthly income with a distribution yield of approximately 7.45%.

Cons

• The share price has declined over the last year (a one-year price return of approximately -9.16%).

• The fund shows a "mild" erosion-risk score.

Beginner takeaway

When looking at PFD, it is helpful to distinguish between the cash you receive (distributions) and the value of your shares (price return). While the fund offers a high distribution yield, the share price has recently moved downward. Always look at "total return" to get a fuller picture of how the fund has performed over time.