Understanding the STATE STREET(R) SPDR(R) ICE PREFERRED SECURITIES ETF (PSK)

What this ETF is trying to do

The PSK is an Exchange Traded Fund (ETF) that trades on the NYSE. This type of fund is designed to provide exposure to preferred securities.

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.

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

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

• Year-to-Date (YTD): The price return is approximately -10.79%. However, the total return is higher at approximately -6.08%.

• One Year: The price return was approximately -14.59%, while the total return was approximately -8.56%.

• Three Years: The price return was approximately -9.07%. Interestingly, the total return over three years was positive at approximately 10.80%.

To visualize the price change, the current price is $28.27. The estimated price from roughly one year ago was approximately $33.10.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash. This is called the distribution yield. For PSK, the distribution yield is approximately 7.50%. The fund has a history of paying distributions 12 times over the last year, usually on a monthly basis.

It is important to remember that a high distribution yield does not mean you have earned that much in total profit. You must look at the total return to see how the share price and distributions worked together.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

PSK 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

• Regular Income: The fund provides a distribution yield of approximately 7.50%.

• Positive Long-Term Total Return: While the share price has dropped over three years, the total return (which includes distributions) was positive at approximately 10.80%.

Cons

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

• Mild Erosion Risk: The fund shows a mild erosion-risk score of 75.

Beginner takeaway

When evaluating an ETF like PSK, don't just look at the dividend yield. A high yield can sometimes be accompanied by a falling share price. Always compare the price return to the total return to get a clearer picture of how the investment has performed over time.