What this ETF is trying to do

The NORTHERN TRUST INTERMEDIATE TAX-EXEMPT BOND ETF (ticker: TAXI) is an exchange-traded fund designed to provide exposure to intermediate tax-exempt bonds. Investors often look at these types of funds to find income that may have different tax treatments compared to standard bonds.

What the numbers show

When looking at how this ETF has performed, it is important to look at two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price. For the year, the one-year price return was approximately -2.76%. Year-to-date (YTD), the price return was approximately -4.02%.

• Total Return: This includes both the share price changes and the money paid out through distributions. The one-year total return was approximately -0.20%, and the YTD total return was approximately -1.98%.

Because the total return numbers are higher than the price return numbers, it shows that the distributions helped offset some of the share-price decline. An estimated price from roughly one year ago was $50.69, compared to the current price of $49.29.

Income and distribution explanation

TAXI provides regular cash payments to investors. The distribution yield is approximately 2.70%. This number describes the cash distributions relative to the current ETF price.

The fund typically pays out money on a monthly basis, with 12 payments recorded over the last year. Based on the data, these payments most frequently occur on Mondays. It is important to remember that a distribution yield tells you about the cash being paid out, but it does not guarantee that your original investment will stay at the same value.

NAV erosion explanation

Some investors worry about "NAV erosion," which is when the actual value of the fund's underlying assets declines over time. The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, we can look at the "erosion-risk score" to see how the share price is behaving. TAXI has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is described as "good," and there is no severe erosion-risk flag present. This suggests that the share price has not shown signs of extreme deterioration according to these specific risk measurements.

Pros

• Regular Income: The fund provides monthly distributions, which can be helpful for those seeking regular cash flow.

• Stable Risk Profile: The erosion-risk score suggests the price movement has been relatively stable or sideways rather than experiencing a sharp collapse.

Cons

• Negative Returns: Both the price return and the total return have been negative over the last year and year-to-date.

• Price Decline: The share price has decreased from its estimated level one year ago.

Beginner takeaway

For a new investor, TAXI is an ETF that focuses on tax-exempt bonds and pays out monthly income. While the share price has declined recently, the total return (which includes the cash payments you receive) is slightly better than the price return alone. Always remember that receiving regular distributions does not prevent the share price from falling.