High Yields Will Never Be The Same - Here's Why

2025-02-25 08:30:00 ET

Summary

• High-yield investments like BDCs, MLPs, CEFs, and REITs offer substantial dividend yields, often overlooked by retail investors due to a lack of awareness.
• Option ETFs generate high income by writing options against equities, with some offering extreme yields, like Yieldmax MSTR Option Income Strategy ETF at 113%.
• These funds are for income generation, not total return or capital appreciation, and require a different evaluation lens than traditional investments.
• Investors must consider risks, including price volatility, sustainability of distributions, and potential unfavorable tax consequences, before investing in high-yield option ETFs.
• This strategy caters toward investors who want to build a second income stream from distributions. We are still early to the landscape of these funds.

'High Yield' Is No Longer High Yield

If you follow me and frequently read my articles, you'll know that I cover a plethora of high-yield investments. I am open to asset classes that are typically considered to be 'non-traditional' because of their ability to provide investors with a higher dividend yield. This can include asset classes such as Business Development Companies (BDCs), Master Limited Partnerships (MLPs), Closed-End Funds (CEFs), and even Real Estate Investment Trusts (REITs). There are plenty of mixed thoughts here on whether or not it's worth it to consider these asset classes compared to traditional index funds....

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