Understanding the Invesco Preferred ETF (PGX)

What this ETF is trying to do

The Invesco Preferred ETF, known by its ticker symbol PGX, is an exchange-traded fund (ETF) listed 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 separate "price return" from "total return."

• Price Return: This measures only the change in the share price. For PGX, the one-year price return was approximately -13.93%. The year-to-date (YTD) price return was approximately -10.41%.

• Total Return: This is a more complete measure because it includes the impact of distributions (cash payments). The one-year total return was approximately -8.40%, and the YTD total return was approximately -6.14%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $11.70, and the current price is $10.07.

Interestingly, while recent short-term returns have been negative, the three-year total return was approximately 14.61%.

Income and distribution explanation

Some investors look at ETFs for regular cash payments, known as distributions. PGX has a distribution yield of approximately 6.86%. This means the cash distributed is about 6.86% of the current share price.

The ETF usually pays out monthly, with 12 distributions recorded over the last year. Most of these payments occurred on Mondays. It is important to remember that a high distribution yield does not guarantee an investor will earn that percentage as a total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

PGX has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not mean the fund's value has definitely collapsed. There is no "severe erosion-risk flag" for this ETF.

Pros

• The ETF provides a distribution yield of approximately 6.86%.

• It has a history of monthly distributions.

• The three-year total return was positive at approximately 14.61%.

Cons

• The one-year price return has been negative (approximately -13.93%).

• The YTD total return is currently negative (approximately -6.14%).

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

Beginner takeaway

When evaluating PGX, it is helpful to look at both the share price and the distributions. A high distribution yield can provide cash income, but it is important to watch the price return as well. If the share price falls significantly, it can impact the overall total return of your investment.