ETF Education Report: NORTHERN TRUST TAX-EXEMPT BOND ETF (TAXT)

What this ETF is trying to do

The NORTHERN TRUST TAX-EXEMPT BOND ETF (ticker: TAXT) is an exchange-traded fund. While the specific investment strategy isn't detailed in the data, its name suggests it focuses on tax-exempt bonds.

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 measures only the change in the share price. For TAXT, the year-to-date (YTD) price return is approximately -4.57%. The one-year price return is approximately -3.91%.

• Total Return: This includes the share price change plus any cash distributions (dividends) paid out. The YTD total return is approximately -2.26%, and the one-year total return is approximately -0.77%.

Because the total return numbers are higher than the price return numbers, it shows that the cash distributions helped offset some of the share-price decline.

To visualize this, we can look at an estimated price from roughly one year ago. The estimated price was $51.11, and the current price is $49.11.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash. This is called the "distribution yield." TAXT has a distribution yield of approximately 3.35%. These distributions are usually paid out monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not guarantee you will make money. Even if an ETF pays out cash, the share price could still go down.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

TAXT has an erosion 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. This suggests the fund's value has not shown signs of significant deterioration according to these specific risk measurements.

Pros

• The fund provides regular monthly distributions.

• The erosion-risk score suggests the fund is currently stable or moving sideways rather than experiencing rapid value loss.

Cons

• The ETF has experienced a share-price decline over the last year.

• Both the YTD and one-year total returns have been negative.

Beginner takeaway

When studying TAXT, notice that the share price has fallen, but the total return is slightly better because of the cash distributions. Always remember that price returns and total returns are different, and a distribution yield is not the same as your total profit or loss.