Yield-focused ETFs have drawn investor attention as traditional defensive dividend stocks see lower and falling yields. A specific 3.1% yielding ETF with technology and large-cap financial services exposure has outpaced the S&P 500 year-to-date and could continue to do so in the final quarter. Covered-call ETFs generate income differently through option premiums and may not always produce high yields, so they should be used as supplements rather than portfolio foundations. Some passive income investors pursue high yields aggressively, which raises concern given variability of option-premium income. Market performance through September and beyond will influence relative returns.
High-yield ETFs have been quite the buzz this year. While covered call ETFs (or premium income, as some are referred to) are really nothing new for the world of passive investors, I do think that many of the swollen yields have attracted investor attention due to the lower (and falling) yields, particularly in the defensive dividend stocks, which have also had decent years. Indeed, there seems to be somewhat less yield going around, and not enough to satiate some of the more aggressive passive income investors out there.
In this piece, we'll check in on a high-yielding ETF that's outpacing the S&P 500 so far this year. Indeed, the S&P has already passed the 10% gain mark, and there's still more than a quarter to go before 2025 comes to a conclusion. It'll be interesting to see how September shapes up for financial markets as traders return from their summer breaks, perhaps with the hopes of buying (or selling) stocks that have been sitting comfortably on the beach over the last two months or so.
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