ETF Education Report: INVESCO VARIABLE RATE PREFERRED ETF (VRP)

What this ETF is trying to do

The INVESCO VARIABLE RATE PREFERRED ETF (VRP) is an exchange-traded fund. While the specific holdings are not listed in this report, ETFs like this generally aim to provide exposure to certain types of investments to help investors meet specific goals.

What the numbers show

It is important to understand the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and the money paid out through distributions.

• Year-to-Date (YTD): The price return is approximately -0.99%, but the total return is 2.14%.

• One Year: The price return was approximately -3.29%, while the total return was 2.72%.

• Three Year: The price return was approximately 6.78%, while the total return was 27.39%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $24.91, and the current price is $24.09. This shows a share-price decline over that period.

Income and distribution explanation

This ETF has a distribution yield of approximately 6.12%. This means the cash distributions are about 6.12% of the current share price. Distributions for this ETF usually happen monthly, with 12 payments made over the last year. Most of these payments occurred on Mondays.

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

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value, which is the actual value of the assets held by the fund. If an ETF's share price falls, it does not always mean the NAV is eroding.

In this case, the fund has an erosion-risk 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.

Pros

• The fund has a high income rating grade of "A."

• The total return figures over one, three, and five years are positive, even when the share-price returns were negative.

Cons

• The fund has experienced some share-price declines over the last year and year-to-date.

Beginner takeaway

When looking at VRP, it is helpful to distinguish between the share price and the total return. Even when the share price goes down, the total return can be positive because of the cash distributions paid out to investors. Always remember that a high yield is just one part of how an ETF performs.