Why We're Avoiding This 89% Dividend ETF

Core Viewpoint - The YieldMax Ultra Income Strategy ETF (ULTY) offers an enticing 89% annualized yield, but this high yield is accompanied by significant risks and underperformance compared to traditional investments like the S&P 500 [4][5][15]. Group 1: Yield and Performance - ULTY's 89% yield is based on the annualized weekly payout for the last week of August, which appears attractive but is misleading due to underlying price volatility [4][6]. - Investors who purchased ULTY at its launch in February 2024 have only seen an 11.5% return, significantly lower than the potential returns from a standard S&P 500 index fund [5][6]. - The fund's price has dropped 71% since its launch, which is a primary reason for the inflated yield [6][7]. Group 2: Investment Strategy and Risks - ULTY employs a covered call strategy, which generates income by selling options on its stocks, but this can limit upside potential in rising markets [8][11]. - The fund has experienced a massive investment turnover rate of 717% within eight months, indicating high management activity and associated costs [10][11]. - The expense ratio for ULTY is 1.3%, which is considered high for an ETF, further impacting net returns for investors [11]. Group 3: Dividend Structure - ULTY shifted from monthly to weekly payouts, which may seem beneficial but complicates cash flow management and increases administrative costs [12][14]. - The weekly dividend has seen fluctuations, with a notable 19.5% reduction from $0.1181 to $0.0949 per share, reflecting the volatility in the fund's yield [14][15].