XYLD - SPYI: Is The 11.9% Dividend Yield Secure? We Think Not

2025-01-08 08:51:32 ET

Summary

• SPYI is a buy-write ETF from Neos with an 11.9% dividend yield, benefiting from a strong equity rally since its 2022 IPO.
• The fund employs a call option strategy on the S&P 500 Index, potentially offering favorable tax implications, but similar to other established funds.
• SPYI's high yield may decrease if the S&P 500 underperforms, unlike long-term competitors with stable 8%-9% yields.
• The ETF compares favorably with its peers on a total return basis, but is not the outperformer from the cohort.
• With equities appearing overvalued, we are on 'Hold' on SPYI, cautioning against evaluating funds solely on dividend yields.

Thesis

The Neos S&P 500(R) High Income ETF ( SPYI ) is an equity exchange-traded fund. The name falls in the buy-write category, and has garnered significant attention as of late. The buy-write space is well covered already, with many funds doing the exact same thing for many years. Its competitors fall both in the ETF and CEF categories, and have a very long operating history....

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