Yieldmax ETF

[Philipkee]

Lately I have been seeing yieldmax ETF with monthly dividends and the overall dividend yields can be over 50%

Anyone bought them? Are they safe for long term? Apparently they earn from options trading

The codes that I am interested in are

TSLY
OARK
AMDY
NVDY

 

[reddevil0728]

Lately I have been seeing yieldmax ETF with monthly dividends and the overall dividend yields can be over 50%

Anyone bought them? Are they safe for long term? Apparently they earn from options trading

The codes that I am interested in are

TSLY
OARK
AMDY
NVDY

You really need to define what’s safe here to you.

you already mentioned dividend yields of over 50% and earn from options trading.

how “safe” can it be?

 

[Philipkee]

You really need to define what’s safe here to you.

you already mentioned dividend yields of over 50% and earn from options trading.

how “safe” can it be?

I guess I hope the etf doesn’t go bankrupt. Cut dividends still ok

 

[reddevil0728]

I guess I hope the etf doesn’t go bankrupt. Cut dividends still ok

But cut dividend and hence price drop like crazy also as good as goner right?

 

[Philipkee]

But cut dividend and hence price drop like crazy also as good as goner right?

True. I hope it doesn’t drop like 50 to 80%. I plan to hold for long and hope it rises long term

 

[reddevil0728]

True. I hope it doesn’t drop like 50 to 80%. I plan to hold for long and hope it rises long term

eh this sort of thing plays with derivative...

if you don't have that sort of appetite. you probably shouldn't consider it

 

[Philipkee]

Nibbling into it but I don’t know if I should nibble harder

 

[reddevil0728]

Nibbling into it but I don’t know if I should nibble harder

Depends on your risk appetite

now market quite bullish so maybe that’s why u so positive.

wait till bearish you see how you react

 

[Philipkee]

Depends on your risk appetite

now market quite bullish so maybe that’s why u so positive.

wait till bearish you see how you react

A friend told me as long as the investment is not your entire life savings (still have sufficient buffer in case of anything) and you did not borrow money to invest, it’s not too bad. You can generally wait out any downturns

 

[reddevil0728]

A friend told me as long as the investment is not your entire life savings (still have sufficient buffer in case of anything) and you did not borrow money to invest, it’s not too bad. You can generally wait out any downturns

True

but also depends on how much are you putting it in.

but the underlying matters too.

if you dca into a dead stock, it will be dead regardless how long you wait

 

[BBCWatcher]

Oversimplifying only slightly, the Yieldmax ETFs seem like a great way to convert capital gains on some high volatility stocks (which are tax free for most residents of Singapore) into capital losses plus dividends (which incur 30% dividend withholding tax for most residents of Singapore) — and to pay a hefty management fee for the privilege. Plus the ETF shares are U.S. estate taxable, although the individual stocks/ETFs they bet on are, too.

…And now you know another reason why the local fetish for dividends is just plain weird.

 

[BBCWatcher]

Let's suppose you bought TSLY (Yieldmax's derivative of TSLA stock) at the closing price on December 30, 2022 (the last trading day of 2022). TSLY paid the following gross monthly dividends in 2023: 0.999, 0.903, 0.902, 0.829, 0.44, 0.803, 1.066, 0.83, 0.585, 0.577, 0.585, 0.604. That's a total gross dividend $9.123 per share. Your net (after 30% withholding tax) dividend would be $6.39. The share price on December 30, 2022, was $14.63, and the closing share price on December 29, 2023 (the last trading day of 2023) was $11.93 for a capital loss of $2.70. So your total gain would've been $3.69 ($6.39 minus $2.70). That's about +25.2% ($3.69 divided by $14.63) in U.S. dollar terms.

OK, now let's look at TSLA stock. TSLA closed at $123.18 on December 30, 2022, and closed at $248.48 on December 29, 2023. That's about +102%. TSLA did not pay any dividends.

Any questions?

Someone please double check my math, of course. Maybe I missed something, but I think this math is correct.

 

[zeroX26]

Lately I have been seeing yieldmax ETF with monthly dividends and the overall dividend yields can be over 50%

Anyone bought them? Are they safe for long term? Apparently they earn from options trading

The codes that I am interested in are

TSLY
OARK
AMDY
NVDY

Wait wat???? Why nobody said anything about this sort of figures? How is it even possible?

 

[BBCWatcher]

Wait wat???? Why nobody said anything about this sort of figures? How is it even possible?

1. Take a stock with high capital gains over a particular period.

2. Inefficiently convert those capital gains (tax free for most residents of Singapore) into dividends (30% tax rate for most residents of Singapore) via the options exchanges. Don't worry about the share price of the fund. It's OK if it goes down. A lower share price boosts the reported dividend yield.

3. Collect a hefty management fee along the way (0.99%/year).

4. If #1 doesn't actually occur, don't pay dividends. Or pay dividends but push your fund's share price down even more.

Why do so many investors in Singapore have a dividend fetish? I just showed you the math. Where do y'all think dividends come from?

 

[Philipkee]

Let's suppose you bought TSLY (Yieldmax's derivative of TSLA stock) at the closing price on December 30, 2022 (the last trading day of 2022). TSLY paid the following gross monthly dividends in that period: 0.999, 0.903, 0.902, 0.829, 0.44, 0.803, 1.066, 0.83, 0.585, 0.577, 0.585, 0.604. That's a total gross dividend $9.123 per share. Your net (after 30% withholding tax) dividend would be $6.39. The share price on December 30, 2022, was $14.63, and the closing share price on December 29, 2023 (the last trading day of 2023) was $11.93 for a capital loss of $2.70. So your total gain would've been $3.69 ($6.39 minus $2.70). That's about +25.2% ($3.69 divided by $14.63) in U.S. dollar terms.

OK, now let's look at TSLA stock. TSLA closed at $123.18 on December 30, 2022, and closed at $248.48 on December 29, 2023. That's about +102%. TSLA did not pay any dividends.

Any questions?

Someone please double check my math, of course. Maybe I missed something, but I think this math is correct.

Actually there is an issue. I actually thought of this. Hold the stock for growth but I realise I have a tendency to panic buy and panic sell so I decided for lower returns but monthly dividends to just hold and don’t sell (unless it becomes a meme stock where is like jumps 500%).

I have many funds now, the latest is this ETF but other monthly dividend stocks though the bulk of my funds are still in unit trusts and cash savings

Wait wat???? Why nobody said anything about this sort of figures? How is it even possible?

I saw something like these figures on yahoo finance but never calculated how they got the percentage

 

[BBCWatcher]

Actually there is an issue. I actually thought of this. Hold the stock for growth but I realise I have a tendency to panic buy and panic sell so I decided for lower returns but monthly dividends to just hold and don’t sell (unless it becomes a meme stock where is like jumps 500%).

So what are you going to do when the Yieldmax ETF stops paying dividends and/or its share price crashes? Because that's what'll happen when its underlying stock/ETF falls.

Obviously you can do what you're doing if you wish, but you're paying a HUGE penalty to still punt on the underlying highly volatile individual stock/ETF. A ~75 percentage point penalty in one year! Yikes!

 

[BBCWatcher]

The Street explains how this works here using OARK/ARKK as their example. To summarize, with Yieldmax ETFs you're inefficiently converting nontaxable capital gains into taxable dividends when the underlying stock/ETF goes up, and you're still subject to significant downside risk when the underlying share price falls. And your estate is still subject to U.S. estate tax on your Yieldmax ETFs. That part doesn't change.

 

[BBCWatcher]

For U.S. persons a Yieldmax ETF comes closer to making some sense in some cases. U.S. persons are subject to the following income tax rates:

• qualified dividends: preferential rates
• non-qualified dividends: ordinary income tax rates
• long-term capital gains (asset held at least 1 year): preferential rates
• short-term capital gains: ordinary income tax rates

Preferential rates top out at 23.8%, and ordinary income tax rates top out at 40.8%. These are the top marginal federal income tax rates and include the Net Investment Income Tax (NIIT). State and occasionally local income taxes may apply depending on where you live.

Dividends from Yieldmax ETFs are probably non-qualified dividends, so ordinary income tax rates would apply. But if you'd otherwise punt on the underlying stock/ETF on a short-term basis then the tax rate would be the same for you. So the tax part may be a wash for some U.S. persons.

For most residents of Singapore the capital gains tax rate is zero and the dividend tax rate is 30% (on U.S. stocks and ETFs), so any conversion of capital gains into dividends is automatically bad from a tax point of view. It's especially bad when the conversion is inefficient, as it has to be when an actively managed fund does it.

 

[yslvlys]

I think the YieldMax ETFs on the mega caps are worth the risk. The underlying is unlikely to fall / rise by large percentages within a week. So the income from the etf shd be pretty stable. Of course there could be a few scenarios where the share prices fluctuate by a lot eg. Nvidia. But those are pretty much one offs and won't wipe out the etf. Even with WHT, the total return would probably be still double digit percentages. Just don't allocate more than 5% of your portfolio to it, in case shat does happen.

 

[Philipkee]

I think the YieldMax ETFs on the mega caps are worth the risk. The underlying is unlikely to fall / rise by large percentages within a week. So the income from the etf shd be pretty stable. Of course there could be a few scenarios where the share prices fluctuate by a lot eg. Nvidia. But those are pretty much one offs and won't wipe out the etf. Even with WHT, the total return would probably be still double digit percentages. Just don't allocate more than 5% of your portfolio to it, in case shat does happen.

I actually plan to hold on to my yieldmax but I only hold about 50 shares of each fund
TSLY
AMDY
OARK
NVDY

I might add two more CONY and AMZY but at most only 50 shares each

I did consider topping up and putting more but after the replies, I think I just stick to 50 shares at most and look else where.