High-Yield ETFs: TSLY and XPAY Offer Dividend Yields of 20% or Higher

Two high-yield ETFs, YieldMax TSLA Option Income Strategy ETF (TSLY) and Roundhill S&P 500 Target 20 Managed Distribution ETF (XPAY), offer dividend yields of 62.37% and 21.43%, respectively. TSLY uses a synthetic covered call approach and carries an expense ratio of 0.99%, while XPAY has a monthly distribution and a total of $5.1 million in assets under management. Both ETFs are actively managed and offer unique investment strategies for income-seeking investors.

Two high-yield exchange-traded funds (ETFs), YieldMax TSLA Option Income Strategy ETF (TSLY) and Roundhill S&P 500 Target 20 Managed Distribution ETF (XPAY), have recently garnered attention for their impressive dividend yields. TSLY offers a forward yield of 62.37%, while XPAY provides a forward yield of 21.43%. Both ETFs employ unique strategies to generate these high yields, but investors should be aware of the risks and complexities involved.

YieldMax TSLA Option Income Strategy ETF (TSLY)

TSLY, which has been trading since November 2022, utilizes a synthetic covered call approach to generate income. The fund buys call options and sells put options on Tesla (TSLA) stock, creating synthetic long exposure. It sells short-term call options to generate income, but this strategy caps upside potential and leaves the fund fully exposed to downside risk. TSLY's expense ratio is 0.99%, and it oversees approximately $1.09 billion in assets. While the fund has experienced significant losses, with a year-to-date decline of 43%, its high yield and unique strategy make it an interesting option for income-seeking investors.

Roundhill S&P 500 Target 20 Managed Distribution ETF (XPAY)

XPAY, launched in October 2024, is part of the Roundhill Investments family. It tracks the S&P 500 Index using deeply in-the-money FLEX Options on the SPDR S&P 500 ETF Trust (SPY). This strategy allows XPAY to maintain synthetic exposure to the S&P 500 while managing cash flows to support its monthly distribution target. The fund has a total of $5.1 million in assets under management and an expense ratio of 0.49%. XPAY's year-to-date decline is 4%, but its high yield of 21.43% makes it an attractive option for investors seeking income.

Risks and Considerations

While these high-yield ETFs offer compelling income opportunities, investors should be cautious. Both TSLY and XPAY are actively managed, which can lead to higher fees and tax liabilities. Additionally, the unique strategies employed by these funds carry specific risks. TSLY's synthetic covered call approach exposes the fund to significant downside risk, while XPAY's use of FLEX Options may lead to tracking errors and increased volatility.

Conclusion

High-yield ETFs like TSLY and XPAY offer income-seeking investors unique opportunities to generate substantial returns. However, these funds are not without risks. Investors should carefully consider the strategies employed by these ETFs and weigh the potential benefits against the inherent risks. For those willing to take on the complexities and uncertainties, these high-yield ETFs may provide a valuable addition to a diversified portfolio.

References

[1] https://www.ainvest.com/news/navigating-mirage-20-dividend-etfs-risks-realities-leveraged-strategies-2507/
[2] https://finance.yahoo.com/news/2-etfs-offering-juicy-dividend-233002522.html
[3] https://finance.yahoo.com/news/fndx-popular-dividend-etf-passive-132300971.html