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Debunking myths about Yieldmax ETFs
Contrary to popular opinion, Yieldmax ETFs are not ponzi schemes and they're more sustainable income investment vehicles than people realize.
Dissecting the Markets
April 21, 2025
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Over the past few years, the popularity of Yieldmax ETFs has exploded. The high dividend yields were maintained, people are showing off their fat weekly and monthly dividend checks on social media, and some even saying they’ve received more in dividends than they’ve invested into the ETF so far in their journey.
Personally, I invest in Yieldmax ETFs. The ETFs I’ve invested in are $YMAX ( ▼ 1.63% ) and $YMAG ( ▼ 0.79% ) . I chose to invest in their “fund of funds” ETFs instead of their individual stock ETFs because of the built-in diversification and they have a history of generating more consistent income.
Below, you can see how consistent the weekly dividends that both $YMAX ( ▼ 1.63% ) and $YMAG ( ▼ 0.79% ) are ever since they switched from paying dividends every month to every week. While $YMAX ( ▼ 1.63% ) looks more consistent than $YMAG ( ▼ 0.79% ) , both offer great income every week.
YMAX’s dividend history, SeekingAlpha
YMAG’s dividend history, SeekingAlpha
When calculating the total return of investing in both $YMAG ( ▼ 0.79% ) and $YMAX ( ▼ 1.63% ) since they went public, these are their overall returns from 1/30/24 to 4/17/25:
$YMAX ( ▼ 1.63% ) : 6.53%
$YMAG ( ▼ 0.79% ) : 10.27%
In other words, if you invested $10,000 into $YMAX ( ▼ 1.63% ) on 1/30/24, you would have $10,653.23 today. For $YMAG ( ▼ 0.79% ) , that number is $11,027.21. Despite the steep drawdowns of the past couple of weeks, investors are still in the green as long as they keep reinvesting their dividends.
While these returns may not be as impressive as what the “VOO and chill bros” are getting, for those like me who are entirely focused on maximizing their cash-on-cash returns and just want to receive tons of dividends every week, we like the returns we’re getting.
Even if you do want to capitalize on the upside of the security, Yieldmax’s ETFs do allow people to capitalize on the upside. An X influencer named @satstackhustle made an insightful thread on $MSTY ( ▲ 0.71% ) and the lessons here apply to all other Yieldmax ETFs that focus on the synthetic covered call strategy.
Debunking MSTY Myths
The Chief Trading Officer of YieldMax funds, @JayPestrichelli went on @cenaclecapital show to discuss them in detail. Here are some questions he answered:
1. Doesn't MSTY upside have a hard cap due to its covered call strategy?
- MSTY uses call spreads:
— Stacking Sats (@satstackhustle)
12:37 AM • Apr 16, 2025
The lessons from this thread are as follows:
There is no hard cap on upside
For the single-stock ETFs, the yields are more volatile because they fluctuate with the volatility and movements in the stock price
The dividends come from realized option premium, not from selling down your capital. That realized option premium comes from selling the call options, as those gains are recognized immediately.
Traditional covered call funds withhold gains while Yieldmax distributes all realized option premium income directly to investors rather than retaining it.
These ETFs can serve as both a long-term income play or growth play via reinvestment.
As someone who invested in Yieldmax ETFs during my early years, I enjoyed receiving the fat dividend checks every month. Understanding how the options strategies worked made me comfortable with them. In the past, many worried that these income ETFs would be dead money because their price has declined immensely since their IPO, and the yields were “too good to be true.” But in the end, those who remained consistently invested in them and reinvested their dividends are sitting on gains today.
To their point, $QYLD ( ▼ 0.24% ) has plunged immensely since IPO. But their total returns since 12/12/2013 are positive. If someone invested $10,000 on that ETF in 12/12/13, today, they’d have $21,726.74 today. A return of 117.27%.
On top of that, the monthly dividends that $QYLD ( ▼ 0.24% ) generates are fairly consistent.
Conclusion
If $QYLD ( ▼ 0.24% ) is able to maintain consistency for many years, I can see $YMAX ( ▼ 1.63% ) and hopefully $YMAG ( ▼ 0.79% ) doing something similar. The high cash-on-cash returns make investing in these ETFs worth it even if they’re underperforming the S&P.
To put things to perspective, if someone wanted to receive $100,000 in dividend income, they can either:
Invest in $VOO ( ▼ 1.11% ) , have a 1.3% dividend yield, they would need their portfolio to be worth near $7.7 million (this is the most popular approach people have to investing)
Have a portfolio value worth $1 million and buy a 10% yielding ETF like $QYLD ( ▼ 0.24% )
Which approach sounds more attainable? It’s approach #2.
With Yieldmax ETFs, they’re able to achieve that dividend income target with an even lower portfolio value since their yields can be from around 30% with $YMAG ( ▼ 0.79% ) to 50% with $YMAX ( ▼ 1.63% ) .