What Happens When You Know How Much You’ll Make Every Month

Investors looking for a predictable income stream combined with high yields might like Target Pay ETFs. You’ve probably heard of Target Date Funds. These provide a set-and-forget portfolio for retirement with a shifting asset mix designed to become more conservative over time as a specific target date (like a retirement year) approaches.    

Target Pay ETFs are focused more on outcome than timing. They are good for investors looking for stability and reliability in their payments. This makes them attractive to retirement investors in particular.

Here is a list of currently available ETFs discussing their portfolio assets and target yields:

• The Defiance S&P 500 Income Target ETF (SPYT) uses options for a synthetic long position in the S&P 500 and sells call options with a target yield of 20%.
• The Defiance Nasdaq 100 Income Target ETF (QQQT) employs the same strategies as SPYT, utilizing the Nasdaq 100 index as its underlying. QQQT targets a 20% distribution yield.
• The YieldMax Target 12 Big 50 Option Income ETF (BIGY) owns a select portfolio of 50 large-cap stocks. Call options and spreads are sold to generate a 12% distribution yield.
• The YieldMax Target 12 Semiconductor Option Income ETF (SOXY) owns a portfolio of select semiconductor stocks. The target yield is also 12%.
• The YieldMax Target 12 Real Estate Option Income ETF (RNTY) owns a select portfolio of real estate stocks. Do you see a pattern here? Call options and option spreads are employed to generate a 12% distribution yield.
• The VistaShares Target 15 Berkshire Select Income ETF (OMAH) has a portfolio that owns the 20 largest holdings of Warren Buffett’s Berkshire Hathaway (BRK.B). Options are sold against the portfolio holdings or BRK.B to generate a 15% target distribution yield.
• The VistaShares Target 15 USA Quality Income ETF (QUSA) owns a portfolio of stocks focused on companies with strong financial metrics, such as high profitability and low leverage. QUSA strives to pay a 15% distribution yield.
• The Amplify Bitcoin 2% Monthly Option Income ETF (BITY) provides exposure to Bitcoin ETF returns and sells weekly call options to produce a 2% per month distribution yield. The math gives a 24% annual yield.

All of these ETFs pay a monthly dividend. The actual dividend amounts will vary somewhat from month to month as the value of the underlying assets moves up and down.

For the investor looking for a stable income stream, a portfolio consisting of some or all of these ETFs would meet that goal, with a yield exceeding 1% per month.

These yields aren’t bad but in many cases you can do much better. Many of the funds in my ETF newsletters pay well above those quoted above.