ETF Education Report: PACER AMERICAN ENERGY INDEPENDENCE ETF (USAI)

What this ETF is trying to do

The PACER AMERICAN ENERGY INDEPENDENCE ETF (ticker: USAI) is an exchange-traded fund that focuses on the energy sector. It holds a variety of companies within this industry. Based on its top holdings, the fund has significant exposure to companies like Cheniere Energy Inc, Energy Transfer LP, and Enterprise Products Partners LP. Please note that the list of holdings provided is a partial list of the largest companies in the fund and can change over time.

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 measures only the change in the share price.

• Total Return includes both the share price change and any cash distributions (dividends) paid out.

For USAI, the numbers show growth in both areas:

• Year-to-Date (YTD): The price return is approximately 17.42%, while the total return is approximately 21.17%.

• One Year: The price return was approximately 13.00%, and the total return was approximately 18.10%.

• Three Year: The price return was approximately 69.25%, and the total return was approximately 93.83%.

To give you an idea of price movement, the current price is $44.79. The estimated price from roughly one year ago was approximately $39.64.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash. This is called a distribution yield. USAI has a distribution yield of approximately 4.29%. This means the fund has paid out trailing distributions of $1.92 per share over the last year. These payments usually happen monthly, and most of them have been distributed on Thursdays.

It is important to remember that a high distribution yield is not the same as total return. While distributions provide cash, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

NAV erosion refers to a situation where the value of the underlying assets in the fund decreases significantly. Some investors worry about this because if the "principal" (the original money put in) shrinks, it can be harder to grow wealth.

For this ETF, the erosion-risk score is 100, and the label indicates "No price erosion detected." There is no severe erosion-risk flag for this fund.

Pros

• The fund has shown positive price returns and total returns over the one-year and three-year periods.

• It provides regular monthly cash distributions.

Cons

• The fund is focused on a specific sector (energy), which means it may behave differently than the broader stock market.

• As with all investments, share prices can go up or down.

Beginner takeaway

USAI provides exposure to the American energy industry and offers regular monthly distributions. When studying this ETF, remember to look at the total return to see how much you would have earned including the cash payments, rather than just looking at the share price. Always distinguish between the cash you receive (yield) and the actual growth of your investment.