Understanding the F/M US Treasury 30 Year Bond ETF (UTHY)

What this ETF is trying to do

The F/M US Treasury 30 Year Bond ETF, known by its ticker symbol UTHY, is an exchange-traded fund (ETF) that trades on the NASDAQ. This type of fund focuses on long-term U.S. Treasury bonds.

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: This measures only the change in the share price.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out to investors.

For UTHY, the numbers show a decline in both areas:

• Year-to-Date (YTD): The price return is approximately -11.25%, while the total return is approximately -8.04%.

• One Year: The price return is approximately -13.35%, while the total return is approximately -9.20%.

• Three Year: The price return is approximately -12.62%, while the total return is approximately -0.15%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $42.25, and the current price is $36.61.

Income and distribution explanation

Some investors look for ETFs that pay regular cash. UTHY has a distribution yield of approximately 5.20%. This means the fund pays out cash relative to its share price. These distributions usually happen monthly, with 12 payouts recorded over the last year.

It is important to remember that a high distribution yield does not mean you are earning that much in total return. As seen in the data above, even though the fund pays cash, the total return has still been negative over the last year.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price does not always mean the NAV is eroding, we use an erosion-risk score to measure this risk.

UTHY has an erosion score of 75, which is labeled as "Mild price erosion." This means there is a mild risk of price deterioration. However, the fund does not have a "severe erosion-risk flag."

Pros

• The fund provides regular monthly cash distributions.

• It offers a distribution yield of approximately 5.20%.

Cons

• The share price has declined over the one-year and three-year periods.

• The total return (which includes distributions) has been negative for the last year.

• There is a measurement of "mild price erosion."

Beginner takeaway

When looking at UTHY, it is helpful to distinguish between the cash you receive (distribution yield) and the actual growth of your investment (total return). While the fund pays regular monthly income, the share price and total returns have trended downward over the past year. Always look at the total return to see how much value you are actually gaining or losing.