Dividend ETF’s

[Porsche911]

Does anyone have an opinion on high paying dividend ETF’s such as:

UTG, UTF, JEPI, PDBC

Currently paying yields of 7%, 7%, 9%, and 40% respectively. 

Am I missing something?  This seems too good to be true.  The bulk of my money is in VTI.  I know there won’t be as much growth as owning VTI but these dividend yields are nothing to sneeze at.   Any help or suggestions would be greatly appreciated.

Thank you

[Rob_bob]

First, UTG and UTF are not ETFs, they are Closed End Funds, or CEF's and actively managed.  The fund share price can trade at a premium or discount to the funds net asset value.  They also use leverage to boost yield. They are among the few CEF that have increased their NAV since the fund inception date.  I like them and own both.

The other two are actively managed ETFs, JEPI has only been around since the middle of 2020 so it doesn't have much history.  PDBC is a commodity fund that basically trades futures contracts.  The 10 year chart shows the price has basically traded sideways with volatility.

I would not use these funds if you are in the accumulation phase of life.  If you are retired and looking for an income stream and not focused on capital growth but are okay with sideways or lower growth and active management you could take a closer look.

A good resource for learning about CEFs is CEFConnect website https://www.cefconnect.com/fund/UTG

[LightStache]

Does anyone have an opinion on high paying dividend ETF’s such as:

UTG, UTF, JEPI, PDBC

Currently paying yields of 7%, 7%, 9%, and 40% respectively. 

Am I missing something?  This seems too good to be true.  The bulk of my money is in VTI.  I know there won’t be as much growth as owning VTI but these dividend yields are nothing to sneeze at.   Any help or suggestions would be greatly appreciated.

Thank you

I was intrigued about PDBC because 40% is such an outlier. Looks like there were two one-off dividends in Dec '21 that created the 40% figure you cite. Those dividends drove the funds value from $22 to $14, so really they had zero net effect. Since then it looks like PDBC has a 0% yield. That story makes sense because commodities were crazy in 2021 and have now come back down to earth. Your VTI yield at 1.5% is higher.

Your intuition is right that there's no free lunch. In public markets, any good deals should get spotted and pricing normalized very quickly. That means always assume risk-reward correlation.

As @Rob_bob points out, UTG is leveraged, but it's a modest amount. You're primarily giving up total returns in exchange for that high dividend because that's the nature of utilities. Ten year total return for UTG is 9.78% whereas VTI is 13.44%.

Yield is just one of the many important characteristics of an investment. Don't forget to weigh the others too.