Income investors are swimming in yield, helped by the actions of the Federal Reserve. Short-term bond yields have jumped to more than 5%, the highest level in decades. The same is true with money market funds and certificates for deposits.
At the same time, companies like JPMorgan and YieldMax have created covered call ETFs that have over 10% yields. The most popular of these ETFs are the likes of JPMorgan Equity Premium Income ETF (JEPI), JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), and YieldMax TSLA Option Income ETF (TSLY).
In addition to their high dividend yields, investors love their monthly distributions. Now, SoFi has launched another ETF that seeks to pay investors every week. The SoFi Weekly Dividend ETF (WKLY) fund tracks the SoFi Sustainable Dividend Index.
It invests in hundreds of global companies that have a good track record of paying and growing their dividends. Its top companies are firms like Exxon Mobil, JP Morgan, Johnson & Johnson, P&G, and Broadcom. It has over $10 million in assets and a net expense ratio of 0.49%.
Still, while the weekly dividend policy sounds good, I believe that income investors should avoid it. First, it is an extremely small fund with just $10.2 million in assets. As a result, it is a highly illiquid fund, with a daily volume of less than 2,500 shares. It is always recommended to invest in funds that are more liquid.
Second, there are better alternatives in the market. WKLY has a dividend yield of 3.24%. In contrast, covered call ETs like JEPI and JEPQ yield over 10%. If your goal is getting regular returns, then these are better alternatives.
Third, WKLY ETF has little to know dividend growth since it has paid a weekly dividend of $0.02 per share since its inception. As a dividend-focused investor, it is always important to look for growth. Some of the top alternatives are MOAT and COWZ, which I wrote on here.
Finally, I believe that there is no viable reason for investing in an ETF that pays dividends weekly. Instead, you should focus on funds that have a long track record of generating regular income for an extended period.
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