I missed that. Thanks.
I was trying to educate myself about options some years back. Reading posts from experienced users I came across too many cases where what was actually said and what was intended to be said were reversed. Nope, options are not for me. Even indirectly.
Are the dividends taxed as ordinary dividends or as qualified dividends?
An AI search led to a Seeking Alpha comment about TSLY something like “they won’t always have qualified dividends”.
Apparently the 1099-div will indicate the type of dividend also.
The rest of the search yielded info about what is qualified vs ordinary.
And a suggestion that ETF dividends are “special”, with no further comment.
Here’s Investopedia’s explainer for dividends in general. Ie maybe not for ETF dividends?
What Are Qualified Dividends, and How Are They Taxed?.
{
KEY TAKEAWAYS
A qualified dividend is an ordinary dividend that meets the criteria to be taxed at capital gains tax rates, which are lower than income tax rates for some taxpayers.
2
Qualified dividends must meet special requirements issued by the IRS.
The maximum tax rate for qualified dividends is 20%, with a few exceptions for real estate, art, or small business stock. Ordinary dividends are taxed at income tax rates, which as of the 2023 tax year, maxes out at 37%. }
Much more at the link.
I don’t yet find a link that helps me understand the criteria for whether an ETF dividend is qualified or ordinary.
TIA 
And thanks for bringing this topic to the board.
ralph 
Edit, cause apparently I can’t reply to my own post.
https://cdn-tidalfinancialgroup.docsend.com/view/s/pqybr4gpe3gu7tit
This “doc site” has two docs
With columns for ordinary vs qualified dividends.
All the qualified show 0.0000.
While the “ordinary” have some actual numbers.
In addition, there’s a column for “non dividend” distributions.
This suggests to me, that these ditributions are “RETURN OF CAPITAL”…
And the tax complexity that entails.
Why am I asking about taxes?
Ordinary dividends are taxed as “normal income” with rates 10-37%. If your taxable income is high enough, then the rate paid for ordinary dividends will be higher.
Qualified dividends are taxed 10-20%.
There are also some some income thresholds… About $44k triggers some consequences, IIRC.
But, qualified dividends might “save some tax $”.
The Yield Max website says your brokerage is responsible for determining if the dividends are qualified or ordinary.
Therefore, due to “consolidated 1099” … Worrying about the mechanics of entering the numbers in the appropriate tax form box… Might be a non issue.
My HR Block handler just uses the “final numbers” from the Consolidated 1099.
Summary: still no definitive answers. LOLOL.
ralph
Hi @rainphakir,
I believe you will find most will pay ordinary income and capital gains, both long and short. The sites for these Yieldmax ETF’s and Vanguard both agree with this statement.
@RHinCT, I started small positions in MSTY and ULTY. ULTY has options on ARM, CAVA, COIN, CVNA, HIMS, RDDT, RUN, SMCI & TSLA among others. So it is not as narrow as the “single name” funds.
The way I look at our income from our portfolio is by dollars per year.
As always, I know our annual expenses and guaranteed income and Expenses - Income = Cash Shortfall. I target 150% of our Cash Shortfall for the annual cash flow from our portfolio. I have a couple reports I can run to show a per position amount, subtotals by our payment type categories, by account and a grand total.
One quickie report gives me a position total (partial and edited below):
Symb Dividend Yield Shares ABBV ,115.63 3.72% 41 Dividend Core AEP ,906.63 4.04% 41 Dividend Core BBY ,594.24 4.41% 41 Dividend Core F ,322.40 4.61% 41 Dividend Core HYGV ,371.89 8.78% 41 Bond ETF KMB ,551.23 3.50% 41 Dividend Core LLY ,489.64 0.57% 44 Other Dividend MSTY ,708.74 112.93% 41 Stock ETF NLY ,048.60 13.67% 41 Dividend Core O ,193.05 5.94% 42 Dividend Core OKE ,316.55 4.83% 42 Dividend Core PAYX ,260.28 3.37% 41 Dividend Core PEP ,231.02 3.34% 42 Dividend Core SWK ,091.66 3.99% 45 Dividend Core ULTY ,081.32 98.51% 47 Stock ETF Total ,418.55
This gives me a quick reference from the commandline for positions.
If I am looking to add cashflow, I do something like this spreadsheet:
| Income Target | $5,000.00 | |||
|---|---|---|---|---|
| O | NLY | ULTY | MSTY | |
| Payments/Year | 12 | 4 | 12 | 12 |
| Yield | 5.95% | 13.67% | 98.23% | 113.30% |
| Period Dividend | 0.263 | 0.65 | 1.1337 | 2.332 |
| Annual Dividend | 3.156 | 2.6 | 13.6044 | 27.984 |
| Price | $53.00 | $19.02 | $13.85 | $24.70 |
| Shares | 1584.284 | 1923.077 | 367.528 | 178.674 |
| Investment | $83,967 | $36,577 | $5,090 | $4,413 |
I start with a target amount of cash I want to generate, $5,000/year in the above.
Then based on the dividend amount/year, how many shares would I need to buy and at what cost.
Once I have that info, I assess the various risks.
Our position in NLY is 2.69% vs O at 11.62%. Going further, I started MSTY at 0.27% and ULTY at 0.22%. And another step ahead, I have MSTY and ULTY excluded from the calculations for our expense coverage, so they are just “extra cash.”
So, they are risky but the risk to our portfolio is low and any loss of income from them will not affect our long-term income plan since they are excluded.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
https://discussion.fool.com/u/gdett2/activity (Click Expand)
I did have some ULTY, but sold it and went 100% with CONY. I may move some of the profit dividends into MSTY and ULTY from CONY…doc
My CONY holdings have gone up almost 43% over the last 4 dividends. To clarify, I am reinvesting the dividend and have 43% more shares than I had from my original purchase. The cash value of those shares has gone up 1.1553% so I have a little over 15% unrealized profit. The dividend continues to be very good…doc
edit: I also entered a small position with MSTY and the share price has gone up about $2 currently. Its next dividend will be around the 7th or 8th in August.
edit: the CONY position I am calculating from is a SEP IRA that I made my purchase 5 months ago and have 4 dividends.
Doc you could really juice your returns with selling calls.
Andy, I am trying to make my life less stressful. I used to be a very active options trader. Buying dividend funds has made my life so much easier…doc
I get it Doc I just noticed the options on it and thought I want some of that. Thanks for bringing it to my attention. Note: the dividends do fluctuate but are very good. The fund does fluctuate also. You already knew that Doc just trying to be transparent.
Hi @physician,
They have a set schedule for the year for the 2 types of funds they run:
https://www.yieldmaxetfs.com/distribution-schedule/
They give the Declaration, Ed-div, Record and Payment dates for the whole year.
They are “normal” for ETF’s about posting the actual notice on their site. The info is posted on the Ex-div date.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
https://discussion.fool.com/u/gdett2/activity (Click Expand)
Thanks Gene, I had bookmarked that page and it opens as one of my home pages. The more I read about and watch these funds, the more I learn. I’m thinking that if the stock (COIN MSTR) that the etf invests in has a nice move up during the month, the etf has a higher dividend. I’m waiting to see if this holds true this month. Both COIN and MSTR have had nice moves up. If the CONY dividend is over $2 then that would support my hypothesis. So the inverse would be true in that if the stock has a nice move down and the CONY dividend is in the $1 range would also support my guess. They make bigger profits from calls going up vs smaller profits from selling calls when the price goes down I think. All of this is a guess…doc
So just jumping back in to report that my holdings in CONY and MSTY continue to perform well. I hold CONY in a SEP IRA and expect my position to double up in the next 2 months if history repeats itself regarding the dividend. I have not put any more cash into this CONY position. I reinvest the dividend every month. My position (number of shares) has grown 78% in 7 months and the total cash value is up also. I haven’t calculated my total return on MSTY, but it is doing excellent too. MSTY paid $4.1981 last week and here is the last few months:
Hi @physician,
Keep in mind the MSTY payout is 7 weeks rather than the “normal” 4 weeks. This happened when they re-aligned their complete payout schedule. It covers the period from 9/5 to 10/23, 48 days.
It should be a more “normal” number next month.
We have MSTY, ULTY, CONY, YBIT and YMAX. They total 4.03% of our portfolio. Collectively, they produce 574% of our Needed Cash, (Expenses - Income = Needed Cash)
I have been using the cash to add to stock positions each week. When I have little bits left over, I add to YBIT and YMAX.
I am still concerned about how they will do in some “troubling” market conditions.
That said, I maintain our dividend/interest companies as before. They currently generate 237% of our needed cash. They are 60.88% of our portfolio. Quite a difference.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
https://discussion.fool.com/u/gdett2/activity (Click Expand)
Thanks Gene, I had forgotten about those extra weeks adding to the dividend. I think you are seeing what I am seeing - the cash dividends are pretty solid every month so far…doc
I hold MSTY and CONY. Those 2 contribute a tremendous amount of income into 2 SEP IRA’s that I’m not touching until I hit 73 and an account that I am living off of currently. The balance is going up even though I take funds out every month for living expenses and travel etc. My son and my son in law both also have CONY in their investment accounts. They both reinvest the dividend and the son said that this month his position in CONY will have doubled this year. Did you see this mornings dividend announcement? Another good month…doc
Hi @physician,
Yes. Friday will be quite a payday with dividends from ABBV, ABT, GEHC, O and PG plus CONY, ULTY and YMAX! Close to 1/2 of our annual needed cash!
Gene
All holdings and some statistics on my Fool profile page
Profile - gdett2 - Motley Fool Community (Click Expand)
Hey Gene and Doc, if the market drops are you holding Cony through the drop? How are you going to handle those stocks that use options? Just curious how you both see it.
Hi @buynholdisdead,
Yes. I want to see the performance over time and a variety of market conditions.
It appears the cash flow drops when the underlying goes the wrong way and pops back when it turns. But I haven’t seen any big moves yet.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
Profile - gdett2 - Motley Fool Community (Click Expand)
Yes sir, I have such a huge gain from the monthly dividends since i purchased in early March that CONY would have to get down to $5 before it would erode the gain. Also, all the news suggests that bitcoin is headed well over $100k due to Trump wanting the US govt to be the largest holder of bitcoin in the world (a strategic reserve)…doc
Ok thanks Gene and Doc. Gene, It has gone from around 30 dollars down to 11 and is now at 15 dollars and that has been since March of this year. That seems like a pretty big drop. But if it didn’t worry you I guess the dividend payout must have been really good.
One more thing, It looks like the payout since March has been $15.19 including the recent distribution.
