There is a new fund called Yieldmax that has ETF’s that invest in one company. TSLY invests in TSLA only. If you look at the holdings they only work with calls and puts. They cover their investments with bonds as collateral and pay a huge dividend. My assessment is that if the stock they option with is successful in the long run, so will the share price continue up. It appears they pay a high dividend every month regardless. TSLY started in Jan 2023 with a share price of $20 approx and today it closed at $14.74 so decreased some $5.26 approx while paying a monthly dividend total since Jan of just under $10.00 (9.90something). rough numbers then would be buy it in 1/2023 for $20 and today have total approx value of $24.74 less taxes and commissions. Most websites say (that I checked the) dividends for the year were saying anywhere from 50% to 90% depending on how they calculate it, but I calculate its over 20% so far this year using the above numbers and will change the last few months of the year probably up if they keep paying almost a one dollar dividend. They have more ETF’s that do the same thing with other stocks - NVDY does the same thing with Nvidia. It is also paying a high dividend. They have one for Amazon (AMZY), AMD (AMDY soon) and Microsoft as well plus others. Visit the site and analyze the risk for yourself. Take a look and give some feedback please if you are a dividend investor…doc
Seems like a way to turn longterm capital gains (tax advantaged) into dividends (taxed at earned income rate).
In addition, this gives the illusion of safety (“Dividends!”) that are disconnected from the underlying health of the business. After all, when a company decides to issue a dividend, it’s taking a vote at the Board of Directors level for that purpose, and is making a claim about its ongoing ability to make a continuing payout at that level. Here’s there’s no such thing.
And what happens if the underlying stock price flatlines or trends down for a sustained period? Then you’re eating into your capital, which limits your ability to make up lost ground when the stock recovers.
And for a 0.99% annual fee.
If you’d like to do something like this, why wouldn’t you instead buy the shares of the company (like TSLA) directly and give yourself a periodic “dividend” by selling a portion of it and pocketing the proceeds? You wouldn’t be paying the nearly 1% “tax” this ETF is charging; and you might even have some ability to pick when you want to sell, possibly improving your returns.
ActonUp
I can’t say it was my intent to have a TSLA strategy when I added to my TSLA stake at various times in the first half of 2023. But, in Aug 2023, I sold most of the TSLA shares purchased in 2023 for a nice gain. All transactions in a Roth IRA account. In addition to being a high growth stock, TSLA is managed by a CEO who is more than just an extrovert (That’s at least two layers of risk).
Thanks for sharing on Yieldmax