Defiance ETFs have become increasingly popular among dividend-focused investors. These exchange-traded funds (ETFs) aim to provide regular income while tracking the performance of major indexes like the NASDAQ 100, S&P 500, and Russell 2000. However, the high dividend yields advertised by some of these funds can be misleading. In this article, we will explore five Defiance ETFs, analyzing their dividend payouts, stock price histories, and underlying performance to determine the best option for dividend-seeking investors.
What Are Defiance ETF?
Defiance ETFs are designed to generate income through enhanced option income strategies, often using covered calls. These funds target investors who want dividends while still gaining exposure to the performance of major market indexes. Below, we delve into five prominent Defiance ETFs that claim to offer significant dividends.
1. QQQY: Defiance NASDAQ-100 Enhanced Option Income ETF
Dividend Analysis
QQQY is among the most talked-about Defiance ETFs, boasting a dividend yield of over 105%. However, this figure is misleading. For example, in August 2024, the fund announced a $345.46 dividend per share. This unrealistic number likely results from a temporary accounting adjustment. A more realistic monthly dividend for QQQY is around $0.83 per share, consistent with its historical payouts.
Over a year, this equates to $9.96 in dividends per share. With the ETF currently priced at approximately $40, QQQY offers a more accurate yield of about 24%.
Price Performance
Since its inception, QQQY has seen its stock price drop from $60 to $40, a 33% decrease. Despite this decline, reinvested dividends have helped mitigate overall losses for long-term investors.
Underlying Index
QQQY tracks the NASDAQ-100, an index known for growth-oriented stocks that typically do not pay dividends. This ETF is suitable for investors who want to generate income from a growth-focused index.
2. JPY: Defiance S&P 500 Enhanced Option Income ETF
Dividend Analysis
JPY claims a dividend yield of 72%. In reality, its average monthly payout is around $0.60 per share. With an annual payout of $7.20 and a current share price of $46, the effective yield is approximately 15%-16%.
Price Performance
JPY’s share price has declined from $60 to $46, a smaller drop compared to QQQY. This ETF has demonstrated better capital preservation, though it offers slightly lower dividends.
Underlying Index
JPY is tied to the S&P 500, a diversified index of large-cap U.S. stocks. While the S&P 500 does not traditionally provide high yields, JPY enhances income by using covered call strategies.
3. SPYT: Defiance S&P 500 Income Target ETF
Dividend Analysis
SPYT targets a consistent 20% dividend yield. Its monthly payouts average around $0.34 per share. With a share price of $20, this yield is sustainable and aligns closely with its stated target.
Price Performance
SPYT has maintained a relatively stable share price, fluctuating minimally over the past year. This stability, combined with its steady payouts, makes SPYT an appealing option for income-focused investors.
Underlying Index
Like JPY, SPYT is linked to the S&P 500. Its goal is to balance income generation with capital preservation, making it a reliable choice for conservative investors.
4. IWM: Defiance Russell 2000 Enhanced Option Income ETF
Dividend Analysis
IWM is known for its high dividend yield, averaging around $0.90 per share monthly. With an annual payout of $10.80 and a share price of $40, the yield is approximately 27%.
Price Performance
IWM’s price has dropped from $60 to $40, similar to QQQY. However, its higher dividend payouts have offset much of the capital depreciation, making it a strong performer for income-seeking investors.
Underlying Index
IWM tracks the Russell 2000, an index of small-cap stocks. Small-cap stocks are generally more volatile but offer greater growth potential. This ETF suits investors comfortable with higher risk in exchange for substantial dividends.
5. USOI: Defiance Oil Enhanced Option Income ETF
Dividend Analysis
USOI offers a staggering dividend yield of 75%. Monthly payouts average $1 per share. With a share price of $16, this yield is accurate and among the highest in the Defiance lineup.
Price Performance
USOI’s share price has fallen from $20 to $16, a 20% decrease. Despite this, its dividends have largely compensated for the capital loss, making it an attractive option for high-yield investors.
Underlying Index
USOI tracks the United States Oil Fund (USO), focusing on the energy sector. This ETF benefits from oil price volatility but carries higher risk due to the cyclical nature of the industry.
Comparing the Five Defiance ETFs
Dividend Yield and Sustainability
| ETF | Dividend Yield | Price Decline | Annual Payout | Dividend Stability |
| QQQY | 24% | 33% | $9.96 | Moderate |
| JPY | 15%-16% | 23% | $7.20 | High |
| SPYT | 20% | Minimal | $4.08 | Very High |
| IWM | 27% | 33% | $10.80 | Moderate |
| USOI | 75% | 20% | $12.00 | High |
Underlying Index Performance
- QQQY and JPY: Track large-cap indexes with growth-oriented stocks.
- IWM: Tracks a small-cap index with higher volatility.
- USOI: Tracks the oil sector, benefiting from energy price fluctuations.
Which Defiance ETF Is Best?
The best Defiance ETF depends on individual investment goals. For high income, USOI and IWM are top contenders. For more stable performance, SPYT and JPY offer balanced options. Meanwhile, QQQY is ideal for investors seeking exposure to tech-heavy growth stocks with a steady income.
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Conclusion
Defiance ETFs provide a unique way to generate income from major market indexes. While their high advertised yields may not always be accurate, their monthly payouts can offer substantial income for investors. When choosing a Defiance ETF, consider factors like dividend sustainability, price stability, and the underlying index. Diversifying across multiple Defiance ETFs could also help balance risk and reward.
For investors focused on dividends, Defiance ETFs offer compelling opportunities. However, due diligence is essential to ensure these high-yield funds align with your financial goals.
Advice for you :
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Faq
What are Defiance ETFs?
Defiance ETFs are exchange-traded funds that generate income through enhanced option income strategies, such as covered calls. They are designed to track major market indexes while paying regular dividends to investors.
Do Defiance ETFs really offer high dividends?
Yes, Defiance ETFs advertise high dividend yields. However, the actual yields can be lower than advertised due to temporary accounting adjustments. For example, QQQY’s advertised 105% yield is unrealistic, with a more accurate estimate around 24%.
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