ETF Education Report: iShares 1-3 Year Treasury Bond ETF (SHY)

What this ETF is trying to do

The iShares 1-3 Year Treasury Bond ETF (ticker: SHY) is an exchange-traded fund. Based on its name, it focuses on U.S. Treasury bonds that have very short maturities, specifically between one and three years.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This only tracks how much the share price itself has changed.

• Total Return: This includes both the change in share price and the money paid out through distributions (dividends).

For SHY, the numbers show:

• Year-to-Date (YTD): The price return is approximately -2.10%, but the total return is +0.53%.

• One Year: The price return is approximately -2.07%, while the total return is +1.50%.

• Three Year: The price return is approximately 0.25%, while the total return is +12.22%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $82.79. The current price is $81.08. This shows a slight share-price decline over the last year.

Income and distribution explanation

This ETF provides regular cash payments to investors. The distribution yield is approximately 3.63%. These distributions usually happen monthly, with the most recent 12-month count showing 12 payouts.

It is important to remember that a distribution yield tells you how much cash was paid out relative to the price, but it is not the same as your total return. As shown in the data above, even when the share price goes down, the total return can be positive because of these cash payments.

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 can sometimes be a sign of erosion, it is not proof of it.

In the case of SHY, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The ETF has a high income rating grade of "A."

• The total returns over one, three, and five years have been positive.

Cons

• The share price has seen some declines (negative price returns) over the last year.

Beginner takeaway

For new investors, SHY demonstrates how distributions can help offset a decline in share price. While the price of a single share might be lower than it was a year ago, the total return accounts for the extra cash paid out to investors. Always look at both price return and total return to get the full picture.