iShares GOVZ Monthly Dividend: Navigating Long-Term Treasury Risks and Rewards

The iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ) recently declared a monthly distribution of $0.0394, marking a slight dip from its April 2025 payout of $0.04 but maintaining its position as a steady income source for bond investors. This article delves into GOVZ’s distribution history, yield dynamics, and the critical risks tied to its ultra-long duration profile, offering insights for those weighing its role in a portfolio.

Distribution Trends: Stability Amid Volatility

GOVZ’s distributions have fluctuated within a narrow range over the past 18 months, as shown below:

The May 2025 dividend of $0.0394 aligns with this pattern, reflecting the ETF’s exposure to U.S. Treasury STRIPS (Separate Trading of Registered Interest and Principal Securities), which lack periodic coupon payments. Instead, income derives from the accrual of principal and interest, leading to smaller but consistent payouts. Investors seeking predictable income should note that distributions may vary slightly due to changes in the fund’s holdings and interest rate environments.

Yield and Duration: High Income, High Risk

GOVZ’s ACF Yield to Worst of 4.02% (as of September 2024) edges out the 30-year Treasury yield by 4 basis points, offering a modest premium for investors willing to tolerate its 26.67-year modified duration—one of the longest among bond ETFs. This duration means GOVZ’s price is exquisitely sensitive to interest rate shifts: a 1% rise in rates could reduce its net asset value by ~26.67%, per the duration formula.

For context, the iShares 10-20 Year Treasury Bond ETF (TLH) has a duration of ~13 years, while the Schwab Long-Term Treasury ETF (SCHO) clocks in at ~18 years. GOVZ’s extreme duration underscores its role as a leveraged bet on falling rates or a store of long-dated Treasury exposure.

Expense Ratio: A Competitive Edge

With an expense ratio of 0.10%, GOVZ offers cost efficiency, especially for long-term holders. This fee structure is roughly half that of actively managed bond funds, allowing investors to retain more of their yield. However, the ETF’s expense ratio remains fixed unless amended by BlackRock, so no changes are expected in 2025.

Key Risks: Rate Sensitivity and Market Uncertainty

The fund’s high duration is its double-edged sword. While it boosts income in a stable or declining rate environment, it amplifies losses during hikes. For example, if the Fed raises rates further, GOVZ’s price could plummet despite its Treasury holdings’ safety.

Historically, GOVZ has mirrored the inverse relationship between bond prices and yields. In 2022, when the 30-year Treasury yield spiked to 4.5%, GOVZ’s price dropped 15%—a stark reminder of its volatility.

Additionally, a data error disclaimer in the fund’s September 2024 report hints at potential inconsistencies in real-time metrics. Investors should cross-check yield and distribution data across multiple sources before making decisions.

Conclusion: A High-Reward, High-Risk Play

The iShares GOVZ ETF delivers a 4.02% yield with monthly distributions, making it attractive for income-focused investors. However, its 26.67-year duration subjects it to extreme interest rate risk, requiring a long-term horizon and tolerance for price swings.

For conservative investors, GOVZ is a gamble: its 2024-2025 distributions have stayed within $0.036–$0.041, but a 1% rate hike could erase years of income gains. Conversely, in a sustained low-rate environment or during a recession-driven flight to safety, GOVZ’s Treasury-backed structure could shine.

The fund’s 0.10% expense ratio and STRIPS structure—avoiding reinvestment risk—add to its appeal, but the disclaimer around data reliability cautions against complacency.

Final Take:
GOVZ is best suited for portfolios with a 5+ year holding period, paired with shorter-duration bonds to balance risk. At its current yield, it’s a high-stakes bet on Treasury longevity—profitable for the patient, perilous for the impatient.

Data as of September 13, 2024. Past performance does not guarantee future results.