Nvidia (NASDAQ: NVDA) has been one of the standout success stories of the last two years — with a firm competitive advantage, growing demand from booming industries, and plenty of hype to boot, the semiconductor company has managed to secure impressive returns.
At press time, NVDA stock is trading at $140.85 — having rallied by 14.04% in the last thirty days, 60.53% over the course of the last six months, bringing year-to-date (YTD) returns up to 192.47%.
Unfortunately, this rapid growth comes at a cost, albeit a bearable one — in the race to maintain cutting-edge tech, the chipmaker isn’t in a position to pay out large sums in the form of dividends, making the stock much less attractive to income investors.
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Simply put, the dividend isn’t worth it — the last quarterly dividend, paid out on October 3, was just $0.010 per share — for reference, this would net investors roughly $0.28, or a quarter, on an investment worth $1,000.
That’s not to say that investors focused on passive income cannot benefit from Nvidia, however — there is one specific exchange-traded fund (ETF) offering more than 50% in dividend yield that warrants a closer look.
NVDY offers steady income from NVDA
The fund in question is the YieldMax NVDA Option Income Strategy ETF (NYSEARCA: NVDY). To sustain the high yield rates that it has become renowned for, the ETF uses a blended strategy that relies on selling options and investing in short-term Treasury instruments.
Options are utilized by way of covered calls — the fund sells call options on Nvidia in order to collect premiums while holding the stock, while also taking advantage of options spreads. The short-term Treasury investments provide a component of steady income, lower risk, and stabilize cash flow.
The method appears to be working, too — at the time of publication, the fund has a distribution rate of 54.74% and a 30-day SEC yield of 3.24% — still respectable, but a ways away from the 77% high in distribution rate it had previously.
Let’s translate the figures into something a bit more tangible. Per the latest data, the fund pays out between $1 and $2.5 to investors each month, depending on performance. Although recent payouts have been on a downtrend, annually, investors can expect to get roughly $13.19 from the fund.
In contrast, NVDY price is currently $26.16, meaning that holding a single share nets you a little over 50% of your investment on an annual basis.
Is NVDY a better investment than Nvidia?
At the start of the year, NVDY was trading at $22.13 — meaning that a $1,000 investment was enough to buy 45 full shares. Ten divided payments were made since — per share, they would have rounded out to $17.325.
For 45 full shares, total payments would be $779.625 — a handy 77.96% return, on top of the 18.21% capital appreciation, which amounts to $181.35, bringing total returns to $960.975, or roughly 96.9%.
Still, while it is a convenient way to get exposure to NVDA and lock in gains regularly, simply investing $1,000 in Nvidia stock at the beginning of the year, when it was trading at $48.17, would have given investors 20 full shares — at a YTD return of 193.10%, that investment would be worth $2,823 today.
