Understanding the PFO ETF

What this ETF is trying to do

The Flaherty & Crumrine Preferred and Income Opportunity Fund Inc (ticker: PFO) is an ETF traded on the NYSE. While the specific investment strategy is not detailed in the data, the name suggests it focuses on preferred securities and income opportunities.

What the numbers show

When looking at an ETF, it is important to separate "price return" from "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash distributions paid out to investors.

Here is what the data shows for PFO:

• Year-to-Date (YTD): The price return is approximately -6.24%. However, the total return is approximately -1.64%.

• One Year: The price return was approximately -9.78%, while the total return was approximately -2.94%.

• Three Years: The price return was approximately 18.05%, and the total return was approximately 45.88%.

• Five Years: The five-year total return was approximately -2.76%.

To visualize the price change over the last year, we can look at the estimated price from roughly one year ago, which was $9.82. The current price is $8.86.

Income and distribution explanation

Some investors look for ETFs that pay regular cash. PFO has a distribution yield of approximately 7.69%. This means the amount of cash distributed is about 7.69% of the current share price. These distributions usually happen monthly, with a trailing amount of $0.68 per share over the last year.

It is important to remember that a high distribution yield does not mean you are earning that much in total return. Total return is the most accurate way to see how the investment performed overall.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of an ETF's underlying assets declines over time. StockValueFinder uses an "erosion-risk score" to measure this risk. PFO has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not necessarily mean the fund's value has collapsed.

Pros

• The ETF provides a distribution yield of approximately 7.69%.

• Over a three-year period, the total return was positive at approximately 45.88%.

Cons

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

• There is a measurement of "mild" price erosion.

Beginner takeaway

When evaluating an ETF like PFO, don't look at the distribution yield alone. High yields can sometimes exist even when the share price is falling. Always compare the "price return" (the change in share cost) with the "total return" (the change in value including cash paid out) to get a full picture of how the fund has performed.