Understanding the Vanguard Total Corporate Bond ETF (VTC)

What this ETF is trying to do

The Vanguard Total Corporate Bond ETF (VTC) is an exchange-traded fund that focuses on corporate bonds. While the specific holdings are not listed in this report, ETFs like this generally aim to provide exposure to a wide variety of debt issued by companies.

What the numbers show

When looking at an ETF, it is important to understand the difference between price return and total return.

• Price Return only tracks how much the share price itself has changed.

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

For VTC, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -4.44%, while the total return is approximately -1.22%.

• One Year: The price return is approximately -5.50%, while the total return is approximately -0.74%.

• Three Years: The price return is approximately 0.52%, but the total return is much higher at approximately 15.59%.

To visualize the price change, we can look at an estimated example. The current price is $74.19. An estimated price from roughly one year ago was $78.51.

Income and distribution explanation

Some investors look for ETFs that pay regular cash. VTC has a distribution yield of approximately 5.10%. This means the ETF paid out about $3.79 in trailing distributions per share. These payments usually happen monthly, with the most common day for a payment being Monday.

It is important to remember that a high distribution yield does not guarantee you will make money. A high yield can exist even if the share price is falling.

NAV erosion explanation

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

VTC has an erosion score of 75, which is labeled as "Mild price erosion." This is considered a mild level of risk, and there is no severe erosion-risk flag for this ETF.

Pros

• Total Return over 3 years: The three-year total return is positive at approximately 15.59%.

• Regular Income: The ETF provides monthly distributions with a yield of approximately 5.10%.

Cons

• Recent Price Declines: Both the year-to-date and one-year price returns have been negative.

• Mild Erosion Risk: The fund shows a mild erosion-risk score of 75.

Beginner takeaway

When studying VTC, notice how the total return is higher than the price return in several categories. This happens because the cash distributions help offset some of the share-price declines. However, because the price return has been negative recently, investors should look at both the income being paid out and the movement of the share price to get the full picture.