Award-Winning ETF With A 12% Dividend Yield
ETF.com is one of the top sources of information about exchange-traded funds (ETFs).
Every year, the website gives out awards to the top ETFs in various categories.
Here’s a link to the award winners as well as the nominees.
The category I’m most interested in is “Best New Options Income ETF.”
Options income ETFs are very popular right now with dividend investors, so it’s important to keep tabs on the new ones coming out.
The winner, NEOS Gold High Income ETF (ticker: IAUI), is one I’d never heard of.
It’s no surprise, given the ETF only manages around $450 million.
Other popular options income ETFs are managing more than $50 billion, so IAUI is minuscule compared to those.
But what IAUI is doing is very interesting to dividend investors.
The ETF only started trading last summer, but it’s been a huge success.
Its stock price was up almost 30% before the war with Iran, but it’s still up over 11% from its inception.
And when you factor in IAUI’s amazing 12% dividend yield, investors are up more than 20% in less than a year.
How does IAUI do it?
It’s a covered call ETF, which means it owns gold and sells call options to generate income.
IAUI collects the premium from selling the call options, which it then pays out as a dividend.
In return, IAUI assumes the risk of the price of gold.
So if the price of gold skyrockets, IAUI will rise, but not as much because of the call options.
Schwab has a good article explaining the covered call strategy.
What does IAUI’s dividend look like?
IAUI pays a dividend every month, and the amount changes based on the income from its options strategy.
Generally, the monthly dividend amount hovers around $0.60, which gives IAUI a dividend yield of around 12%.
And IAUI has a major advantage over other ETFs because it’s tied to gold.
Gold has a low correlation with the stock market, so it can act as a nice hedge in a portfolio dominated by stocks.
So if you own a lot of stocks and you’re looking for some extra income, you should definitely give IAUI a look.
Do you own any gold in your portfolio?
Michael Jennings
Dividend Stocks Research
Category: Other Useful Information
