Dividend Consistency and Growth Potential in the UnitedHealth Group (UNH) Yield Shares Purpose ETF: A Strategic Assessment for Income Investors in a Rising Rate Environment

For income-focused investors navigating the complexities of a rising interest rate environment, dividend consistency and growth potential are critical. The UnitedHealth Group (UNH) Yield Shares Purpose ETF (YUNH) presents a compelling case for those seeking a blend of regular income and long-term capital appreciation. However, its leveraged structure and exposure to a single stock—UnitedHealth Group—introduce unique dynamics that warrant careful analysis.

Dividend Consistency: A Pillar of Income Stability

UnitedHealth Group, a $123.75 billion market capitalization healthcare services giant, has maintained a 50-year streak of dividend increases, a rarity in the sector. Over the past year alone, it has paid a quarterly dividend of $1.88 per share, translating to an annualized yield of $7.52. This consistency is underpinned by the company's diversified operations across health insurance, pharmacy benefits, and technology-driven care delivery.

The ETF's 13.87% yield, while attractive, comes with a caveat: it's derived from a leveraged structure that amplifies both gains and losses. While the fund's expense ratio is 0.00% (likely promotional or structural), its use of up to 25% leverage means volatility is inherent. For context, the ETF's adjusted close price dropped 8.53% in a single month in 2025, underscoring the risks of leverage in a volatile market.

Growth Potential: A Dual-Engine Strategy

The ETF's investment thesis hinges on two factors: capital appreciation from UNH's stock performance and dividend yield from its healthcare operations. UnitedHealth Group has historically outperformed the S&P 500 during periods of moderate interest rate hikes. For example, between 2015 and 2018, its stock delivered an average annual return of 28.5%, even as the Fed raised rates 10 times. This resilience stems from its ability to pass higher borrowing costs to clients while maintaining robust margins.

However, the 2025 downturn—a -43.47% annual drop—highlights a vulnerability. The company's exposure to regulatory shifts and macroeconomic pressures (e.g., rising healthcare costs) can amplify losses in a high-rate environment. The ETF's 25% leverage exacerbates this risk, making it unsuitable for conservative income investors.

Rising Rate Environment: Lessons from the Past

Historical data provides mixed signals. During the 2015–2018 rate hikes, UNH's stock gained 39.83% in 2017, a year when the Fed raised rates four times. This suggests that the company's growth in health care demand and fee-for-service models can offset higher borrowing costs. However, in 2022–2025, as the Fed aggressively hiked rates to combat inflation, UNH's stock underperformed, with a marginal 0.79% gain in 2023 and a steep -43.47% decline in 2025.

The ETF's performance mirrored these trends. While it delivered steady dividends, its leveraged structure led to a 2.10% drop in a single day in July 2025. This volatility underscores the importance of assessing the fund's risk-return profile against your income needs.

Strategic Value for Income Investors

For investors prioritizing dividend consistency, YUNH's 13.87% yield is hard to ignore. UnitedHealth Group's payout ratio (unavailable in the latest data) has historically been conservative, ensuring sustainability. The company's ability to raise dividends at a 6.5% CAGR since 2020 further strengthens its appeal.

Yet, the ETF's structure complicates its suitability for rising rate environments. While the company's core operations are less sensitive to interest rates than, say, real estate or utilities, the leverage component introduces market risk. Income investors should weigh this against alternatives like broad-market dividend ETFs, which offer diversification and lower volatility.

Investment Advice: Balancing Risk and Reward

1. Use YUNH as a Satellite Holding: Allocate a smaller portion of your income portfolio to YUNH, balancing its high yield with lower-volatility assets.
2. Monitor Macroeconomic Shifts: Closely track healthcare sector trends and rate policy. A pivot to a lower-leverage UNH ETF or direct stock ownership may be prudent in a prolonged high-rate environment.
3. Diversify Across Sectors: Pair YUNH with utilities or consumer staples ETFs to mitigate sector-specific risks.

Conclusion

The UnitedHealth Group Yield Shares Purpose ETF offers a high-yield proposition for income investors, supported by the company's 50-year dividend growth streak. However, its leveraged structure and single-stock focus make it a double-edged sword in a rising rate environment. While it can deliver strong returns in favorable conditions, its volatility demands a strategic approach. For those who prioritize income stability over aggressive growth, a cautious allocation to YUNH—coupled with diversification and active risk management—could enhance a well-rounded portfolio.