double SCHD’s 3.39% yield; major underlying holdings include Verizon (VZ) at 4.49% of SCHD with $19.8B free cash flow in FY2024 and a 20+ year dividend growth streak, and Altria (MO) at 4.14% of SCHD yielding 6.16% with 60 dividend increases in 56 years despite declining volume.
DDDD’s doubled income comes from selling upside through options overlays, capping appreciation and creating tax inefficiency from short-term gains while the brand-new $2.3M fund carries NAV erosion risk if distributions exceed earnings.
DDDD’s largest equity holding is SCHD itself at 19.04% of net assets, giving it direct exposure to SCHD’s top dividend payers.
The DDDD Trade-Off: More Yield, Less Upside
DDDD is a brand-new fund with only $2.32 million in net assets and no operating history. The options overlay, primarily covered call spreads on SCHD constituents, caps upside in exchange for premium income. Distributions may also include return of capital, which can reduce NAV over time. The gross expense ratio is 0.99%, versus SCHD’s 0.06%.
Pricey!
Is it worth it for the ETF to do the option work/buying for you?
YieldMax U.S. Stocks Target Double Distribution ETF DDDD
For a $100K investment into that ETF, you pay $990 annually. Buried in that fee is the SCHD fee of $60.
In exchange for $930, you get to let them manage covered calls and buy/sell timing.
With $100K, you have enough portfolio funds to run several options at a time and can roll them forward, etc as desired, Is it worth $78/month to let them handle it?
What if you invest $500K? $50K?
Seems like about $10/hour for $100K or less to have THEM do it.
At $50K or less, you couldn’t duplicate it for anything approximating working hours/AUM.
For $500K, perhaps it starts to make sense, if you like this as a hobby.
“Products” make their money on fees! A good reason to manage one’s own portfolio. One year I broke even after paying $50K in commissions to my broker. That’s when I switched to E-Trade.
I am unconvinced. There have been a lot of these as of late and they seem to work well, until they don’t. I remain unconvinced that generating income from calls is necessarily better than simply taking gains (especially in a taxable account)
Why would one want to own JEPQ where the TOTAL return since inception is worse than the underlying index? These seem to work better in a negative or stable sideways market and underperform when markets are humming.
What about the less volatile JEPI (based on the S&P 500)? No better:
Again, it works well when the market is down, like it is now YTD, but it has underperformed by nearly 4% per year over the last five years and over 5% since inception.
