ETF Education Report: INVESCO FINANCIAL PREFERRED ETF (PGF)

What this ETF is trying to do

The INVESCO FINANCIAL PREFERRED ETF (PGF) is an exchange-traded fund that focuses on financial preferred securities. While the specific holdings are not listed in this report, these types of funds generally aim to provide regular income to investors through distributions.

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 PGF, the one-year price return was approximately -13.96%. The year-to-date (YTD) price return was approximately -10.18%.

• Total Return: This is a more complete measure because it includes both the share price changes and the money paid out in distributions. For PGF, the one-year total return was approximately -8.40%, and the YTD total return was approximately -5.89%.

To see how the price has changed, we can look at an estimated price from roughly one year ago. The estimated price was about $14.76, while the current price is $12.70.

Interestingly, the three-year total return was 13.26%, even though the three-year price return was -6.13%. This shows how distributions can help boost the overall total return compared to just looking at the share price.

Income and distribution explanation

This ETF has a distribution yield of approximately 6.88%. This number describes the cash distributions relative to the current ETF price. PGF usually pays out money monthly, with 12 payments recorded over the last year. Most of these payments have occurred on Mondays.

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. StockValueFinder uses an erosion-risk score to measure this risk. PGF has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and not a definitive proof that the fund's value has collapsed.

Pros

• The ETF provides a regular distribution yield of approximately 6.88%.

• Over a three-year period, the total return was positive at 13.26%.

Cons

• The share price has seen declines in the one-year and year-to-date periods.

• There is a "mild" erosion-risk score of 75.

Beginner takeaway

When looking at income-focused ETFs like PGF, it is helpful to look at both the price return and the total return. A falling share price can be offset by regular distributions, which is why the total return might look different than the price return. Always remember that a high yield is only one part of the story, and it is important to monitor erosion-risk scores.