The semiconductor giant Nvidia (NASDAQ: NVDA) has been one of the best-performing stocks not only in 2024 but also in the last two years.
Despite Nvidia Corporation’s staggering success – and the equally dazzling growth that ensured the chipmaker’s valuation rose by about $3 trillion in 24 months – it has disappointed one group of investors.
Specifically, thanks to NVDA’s low dividend yield – investors who purchased $1,000 worth of Nvidia shares would have received only $0.20 at the latest payment date – fixed-income-seeking traders would generally avoid the company.
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One exchange-traded fund (ETF), however, specifically addresses this shortcoming: the YieldMax NVDA Option Income Strategy ETF (NYSEARCA: NVDY).
Why NVDY is a great Nvidia stock ETF choice
Furthermore, NVDY not only addresses Nvidia stock’s one glaring flaw but also does it spectacularly, as the dividends are distributed monthly, and the annual yield regularly exceeds 50%.
For example, the yield was listed as 56.25% at press time on November 5, meaning that a single share would generate about $14.31 in one year, considering the ETF’s current price of $25.35.
Additionally, as Finbold calculated on October 25, a $1,000 investment in YieldMax NVDA Option Income Strategy ETF at the start of 2024 would have generated nearly $1,000 in profit due to the dividend payments and asset appreciation.
Why NVDY stands out as an NVDA stock ETF
The reasoning behind choosing NVDY as the Nvidia ETF is simple.
Essentially, growth-focused investors seeking to gain great exposure to NVDA stock would do well to simply buy the company’s shares. Diluting the stake through a broader fund would only limit the upside, thus disqualifying the more typical funds for such traders.
As things stand, NVDY is the best ETF available primarily because it enables income-focused investors to benefit from the blue-chip maker’s success in a way that direct ownership can’t.
Should investors stay away from Nvidia shares in late 2024?
The greater question might be whether gaining exposure to Nvidia stock in early November 2024 in any way is the right call.
Indeed, not only are NVDA shares trading close to their all-time highs (ATH) but there has also been a broader slowdown in the industry as multiple chipmakers have recently reported lackluster results.
Furthermore, Super Micro Computer’s (NASDAQ: SMCI) downfall has generated rampant speculation, particularly in the wake of a vague comment made by the founder of Hindenburg Research linking Nvidia with SMCI.
Such a setup would put NVDY investors at particularly high risk. The ETF’s strategy relies on Nvidia volatility and carries substantial danger, as it banks on options spreads for profits.
Still, while the heightened risk could push investors toward more diversified funds, Nvidia’s market leadership almost ensures that its fortunes will dictate the sector’s fortunes, at least in the short term.
A way to hedge against such a danger would be to seek an even more diversified ETF that contains NVDA stock, but that would, on the one hand, dilute the potential gains as much as it would the losses and, on the other, stop being an investment in an Nvidia fund.
Featured image:
JRdes. The NVIDIA logo is being displayed on a smartphone with NVIDIA visible in the background in this photo illustration. Digital image. Brussels, Belgium, February 22, 2024. Shutterstock, February 26, 2024. Date retrieved: November 5, 2024.
