Understanding the iShares 0-5 Year High Yield Corporate Bond ETF (SHYG)

What this ETF is trying to do

The SHYG ETF is designed to provide exposure to corporate bonds. Specifically, it focuses on "high yield" bonds that have a maturity of between 0 and 5 years. High-yield bonds are debt instruments issued by companies that typically offer higher interest rates to investors.

What the numbers show

It is important to understand that "price return" and "total return" tell different stories. Price return only tracks how much the share price moves. Total return includes both the price movement and the cash distributions paid out to investors.

Based on the data:

• Year-to-Date (YTD): The price return is approximately -4.13%. However, the YTD total return is positive at about 0.99%.

• One Year: The one-year price return is approximately -4.60%, while the one-year total return is about 2.26%.

• Three Years: The three-year price return is approximately 1.53%, but the three-year total return is much higher at about 25.05%.

To visualize the price change, the current price is $41.10. The estimated price from roughly one year ago was approximately $43.08.

Income and distribution explanation

This ETF is known for providing regular cash payments. The distribution yield is approximately 7.17%. This means the amount of cash distributed is high relative to the ETF's price. These distributions usually happen monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as total return. Total return is the more complete measurement of how much value was actually gained or lost.

NAV erosion explanation

"NAV erosion" refers to a situation where the value of the underlying assets in the fund decreases over time. While a falling share price can sometimes look like erosion, they are not the same thing.

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

Pros

• Higher Total Returns: Over longer periods, like three years, the total return (25.05%) is significantly higher than the price return (1.53%), showing the impact of distributions.

• Regular Income: The ETF has a high distribution yield and pays out frequently (usually monthly).

Cons

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

• Yield vs. Price: Investors should be aware that the share price can go down even while the fund is paying out high distributions.

Beginner takeaway

When looking at SHYG, it is helpful to distinguish between the share price and the total return. While the share price has recently declined, the total return remains positive because of the cash distributions paid to investors. Always look at total return to get a clearer picture of performance.