CONY (Yieldmax ETF) followup from Sep 2023 post

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.

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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 :slightly_smiling_face:
And thanks for bringing this topic to the board.

ralph :us_outlying_islands:

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.

:us_outlying_islands:
ralph

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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)

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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

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