RYLD: 12%+ Dividend Yields Likely To Sustain As Volatility Returns

2025-03-02 07:43:28 ET

Summary

• This article upgrades my rating on RYLD to buy primarily for two considerations.
• First, its 12%+ dividend yield is near peak levels since its inception, indicating unusually favorable risk premium.
• The current yield is nearly 2x of its historical average of 6.3%.
• Second, the current yield is likely to be sustained, as the implied volatility of its underlying index is quite high.

RYLD ETF: dividend yield now exceeds 12%

I last analyzed the Global X Russell 2000 Covered Call ETF ( RYLD ) back in 2023. More specifically, I published an article entitled “QYLD Or RYLD? There's A Better Idea” in September 2023. As the title already hinted, the focus of the article is to compare RYLD to other alternative funds. The comparison concluded with a hold rating for RYLD based on the following considerations:

Many income investors are familiar with Global X Russell 2000 Covered Call ETF and Global X NASDAQ 100 Covered Call ETF. Both funds currently provide ~12% dividend yields, paid monthly. This article will analyze why such yields are not as attractive as they appear on the surface. Macroscopic parameters such as high interest rates and low volatility index are likely to cause a decline in payouts. A fund with a more reasonable valuation and better price appreciation potential such as RYLG is better in my view under current conditions.

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