Thanks to its pivotal role in the artificial intelligence (AI) boom, a focus on reinvesting in innovation, and general investor hype, Nvidia (NASDAQ: NVDA) has been one of the top performers in the stock market in the last two years.
One area it has not excelled at, however, is dividend yield, making it unattractive for income-focused investors. Indeed, traders who purchased $1,000 worth of Nvidia stock at the start of 2024 received only $0.20 on October 3, the last time the company paid dividends.
Still, this does not mean that traders seeking regular payments cannot benefit from NVDA’s performance and popularity thanks to one exchange-traded fund (ETF) that offers more than 50% in yield.
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Specifically, YieldMax NVDA Option Income Strategy ETF (NYSEARCA: NVDY) utilizes a strategy of covered calls involving Nvidia’s shares, mixed with investments in the short-term U.S. treasuries to take advantage of the chipmaker’s high volatility.
How NVDY offers a 50%+ annual dividend
NVDY generates income by using a covered-call strategy. This involves selling call options on Nvidia shares to collect premiums, while also using options spreads and short-term Treasury investments.
So far, the ETF’s income-generating strategy has been highly successful. According to the data available at press time, it boasts a distribution rate of 55.66% and a 30-day SEC yield of 3.24%.
An investor who owns one NVDY share – priced at $25.59 on October 21 – can expect to receive $13.1988 each year. The ETF pays its investors monthly.
Is NVDY or NVDA stock a better investment?
In addition to providing strong and regular income, NVDY has seen decent growth since it was launched. Specifically, the all-time chart – which starts on May 12, 2023 – demonstrates that the fund is 29.05% in the green. In 2024, the ETF is up 15.63%.
Still, it is worth pointing out that NVDY has achieved its success thanks to Nvidia stock’s high volatility in the period since it was launched. The ETF also carries a significant amount of risk, which it justifies with its high potential payouts.
Simultaneously, the fund is not the best choice for traders mostly interested in growth, as NVDA shares are up 186.17% in 2024 – nearly ten times as much as NVDY. They have, likewise, risen more than 384% since May 12, 2023, to their press time price of $137.94.
