Yieldmax ETF

[Okmolly]

doesn't matter dividend stock or not. what matters is the total returns

What matter is Return of capital

 

[reddevil0728]

What matter is Return of capital

>=0% lor

 

[Okmolly]

>=0% lor

Lmao I already ROC:25% 6 month

 

[reddevil0728]

Lmao I already ROC:25% 6 month

then this is more than just ROC ma

 

[JuniorLion]

If the dividends are 50%, but share price drops by 50%, are you making a gain?

 

[reddevil0728]

If the dividends are 50%, but share price drops by 50%, are you making a gain?

net net 0? excluding transaction cost

 

[Philipkee]

If the dividends are 50%, but share price drops by 50%, are you making a gain?

If the stock lasts long enough, you will gain

 

[limster]

If the dividends are 50%, but share price drops by 50%, are you making a gain?

if there is a company with current and forward yield of 50%, I would be very interested to buy it.

dividends have to be paid out of earnings. If company can pay dividends equal to 50% of its share price, that means earning per share (or profit per share) is equal to half its share price. '

If $1 of share purchase can buy $0.50 of current & forward earnings, I also want to buy, its sure win.
Remember that share price can go up and down, the value of the share is in its current and forward earnings

 

[JuniorLion]

Take a look at TSLY share price over 3 years. -66%

 

[BBCWatcher]

dividends have to be paid out of earnings.

No they don’t. Dividends can also be paid out of asset sales. Many stocks have dividend payout ratios in excess of 100%. Moreover, it’s fairly easy to juice earnings over the short term. It’s much harder to sustain or grow earnings.

 

[limster]

No they don’t. Dividends can also be paid out of asset sales. Many stocks have dividend payout ratios in excess of 100%. Moreover, it’s fairly easy to juice earnings over the short term. It’s much harder to sustain or grow earnings.

care to share examples of such "dividends"?

In the past, I have received special payments and it seems that they are labelled as 'return of capital' to distinguish them from dividends.

 

[BBCWatcher]

care to share examples of such "dividends"?

Sure. Pfizer (PFE) paid quarterly dividends of 42 cents per share on 2023 annual reported earnings of 37 cents per share. That's a high dividend payout ratio, obviously. But it's not automatically a cause for concern because Pfizer's 2023 earnings were impacted by special COVID-19 charges. Nonetheless, Pfizer evidently had to use corporate assets to sustain that dividend through that low reported earnings year.

Another, perhaps better example is Philip Morris (MO). In 2023 its diluted earnings per share were $5.02 versus its dividends for the year of $5.20. MO seems to be a case of a business in terminal decline with unsustainable dividends, although the terminal decline is slow.

In the past, I have received special payments and it seems that they are labelled as 'return of capital' to distinguish them from dividends.

Yes, that happens too. But I'm not aware of any specific labeling requirement, at least not that straightforwardly.

 

[CrashWire]

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.

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.

I just did very cursory reading on this, but apparently "Return of Capital" dividends aren't subject to dividend withholding tax at all, and the various Yieldmax ETFs seem to report >90% return on capital in their recent filings.

(I don't know whether that's an indicator of poor performance or not, since it sounds like they're reducing the NAV and distributing the principal as "income", like the other "income" funds here.)

Data points seem to suggest that IBKR returns any withheld tax once it receives the 1099 filing from Yieldmax.

The estate tax concern still applies, of course.

 

[BBCWatcher]

Data points seem to suggest that IBKR returns any withheld tax once it receives the 1099 filing from Yieldmax.

Maybe, but presumably that's dead money (zero interest) in the meantime.

 

[Jirachi]

These type of ETF has a NAV erosion

 

[yslvlys]

I have small sums in TSLY, AMZY, GOOY, NVDY, AMDY, FBY, MSFO, APLY for 3-6 months. So far so good. Hesitating on CONY and NFLY. I do also have small sums in the actual underlying shares as well. Yeah don't overcommit. Treat this like high risk crypto investment, except that I think the risk is lower but still a bit high.

After about 1.5 years, NAV of all the 8 ETFs I bought have decreased by varying levels. However, taking into account the dividends / distributions (even after WHT if any), 4 out of the 8 ETFs are up 20 to 80%, the other 4 are down by 1-10% only. Overall I am still positive. I think another 6-12 months I would have got back all my capital and I should just be playing with house money and just continue getting distributions / dividends until they go to zero (possible if NAV keep decreasing?). Think the key to playing this is to buy at a low or decent price, so that the rate of receiving the high yield is faster than the rate of NAV going to zero (so far has not happened to any of the ETFs).

 

[Jirachi]

After about 1.5 years, NAV of all the 8 ETFs I bought have decreased by varying levels. However, taking into account the dividends / distributions (even after WHT if any), 4 out of the 8 ETFs are up 20 to 80%, the other 4 are down by 1-10% only. Overall I am still positive. I think another 6-12 months I would have got back all my capital and I should just be playing with house money and just continue getting distributions / dividends until they go to zero (possible if NAV keep decreasing?). Think the key to playing this is to buy at a low or decent price, so that the rate of receiving the high yield is faster than the rate of NAV going to zero (so far has not happened to any of the ETFs).

I read and I suppose you did not reinvest the payouts back to their respective ETFs? So only a few able to see NAV growing without it

 

[yslvlys]

I read and I suppose you did not reinvest the payouts back to their respective ETFs? So only a few able to see NAV growing without it

Yup, no reinvestment. Would be pointless to me if the dividends or distributions received need to be reinvested.

 

[yslvlys]

My NVDY has just broken even. Bought at 21.8/share (includes brokerage fee) in late 2023. Now price is 17/share so lose 4. But I have received 21.90 / share in distributions (net of WHT) already. So the 17/share if I sell or if I hold any future distribution is pure profit, until the share goes to zero (unlikely or may take a long time).
Anyway I don't care much if it goes to zero as I have gotten my money back. It's small holding and I treat it like a junk bond play.