Understanding the Global X U.S. Preferred ETF (PFFD)

What this ETF is trying to do

The Global X U.S. Preferred ETF (PFFD) is an exchange-traded fund that trades on the NYSE. While the specific holdings are not listed in this report, ETFs like this generally aim to provide exposure to preferred securities.

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 only tracks how much the share price itself has changed.

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

For PFFD, the numbers show different trends depending on how long you look:

• Year-to-Date (YTD): The price return is approximately -7.19%, while the total return is approximately -2.61%.

• One Year: The price return was approximately -10.05%, while the total return was approximately -4.10%.

• Three Years: The price return was approximately -2.23%, but the total return was approximately 18.25%.

To visualize the price change, if you had bought a share at its estimated price from roughly one year ago ($19.51), the current price is $17.55.

Income and distribution explanation

This ETF focuses on providing cash to investors through distributions. The current distribution yield is approximately 6.84%. These payments happen frequently, usually on a monthly basis, with 12 payments recorded over the last year. Most of these payments occur on Mondays.

It is important to remember that a high distribution yield does not mean you are guaranteed to make that much money in total. Total return is the more complete picture of how an investment performs.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an "erosion-risk score" to measure this risk.

PFFD has an erosion score of 75, which is labeled as "mild price erosion." This means there has been some mild deterioration in the share price, but it has not triggered a "severe erosion-risk flag."

Pros

• The ETF provides a relatively high distribution yield of approximately 6.84%.

• Over a three-year period, the total return was positive at approximately 18.25%, even though the share price itself declined during that time.

Cons

• The one-year and year-to-date price returns have been negative.

• There is a "mild" erosion-risk score, indicating some price deterioration.

Beginner takeaway

When looking at PFFD, notice that the total return is often higher than the price return. This happens because the cash distributions help offset some of the losses from the falling share price. However, high yields can sometimes be accompanied by a declining share price, so it is important to look at both numbers together.