ETF Education Report: Cohen & Steers Select Preferred and Income Fund Inc (PSF)

What this ETF is trying to do

The PSF ETF is an investment fund traded on the NYSE. Based on its name, it focuses on preferred securities and income-related assets.

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 only measures how much the share price itself has changed.

• Total Return: This includes both the change in share price *and* any cash distributions (dividends) paid out to investors.

For PSF, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -7.69%. However, the total return is higher at -2.27%.

• One Year: The price return was approximately -10.94%, while the total return was approximately -3.96%.

• Three Years: The price return was about 4.52%, but the total return was much higher at approximately 31.44%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was estimated to be $21.02, and the current price is $18.72.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 8.08%. This means the amount of cash paid out is high relative to the current share price.

The fund usually pays these distributions monthly, having made 12 payments over the last year. Most of these payments have occurred on Tuesdays. 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 over time. While a falling share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

PSF has an erosion score of 75, which is labeled as "mild price erosion." This is considered a mild level of risk, and there is no severe erosion-risk flag for this ETF.

Pros

• The fund has a high distribution yield of approximately 8.08%.

• Over a three-year period, the total return was quite strong at approximately 31.44%.

Cons

• The share price has seen a decline over the last year.

• The one-year total return is negative at approximately -3.96%.

Beginner takeaway

When looking at income-focused ETFs like PSF, it is helpful to look at both the price and the total return. A high distribution yield can provide regular cash, but it is important to see how that income compares to the movement in the share price. Always remember that high yields alone can be misleading if the share price is also falling.