An Attractive Yield-Generating ETF Idea

Income-minded investors may want to take a look at the recently launched Strategy Shares’ multi-asset exchange traded fund, which also declared its first monthly distribution, as a way to gain a steady high income stream without worrying about large price swings over time.

The Strategy Shares Nasdaq 7HANDL Index ETF (HNDL) announced its first monthly distribution on Wednesday, February 14, with a cash payout of $0.140292 per share. The distribution rate would support the strategy’s goal of generating a 7% annual distribution. All or a portion of the distribution may include a return of capital, according to Strategy Shares.

The Strategy Shares Nasdaq 7HANDL Index ETF, which is also by Nasdaq Dorsey Wright, tries to reflect the performance of the Nasdaq 7HANDL Index and is designed to support a 7.0% annual distribution rate. The Nasdaq 7HANDL Index consists of a well-diversified, multi-asset portfolio of low-cost ETFs and employs modest leverage in an amount equal to 23% of the total portfolio. The 23% structural leverage provides a modest 1.3x portfolio exposure to enhance the potential total return of the underlying portfolio.

The underlying index seeks to offer the potential for high monthly distributions while maintaining a stable net asset value over time.

“There has been a proliferation of ETFs in recent years focused on providing niche exposures, but there appears to be a lack of innovation around developing client solutions that can aid an advisor’s practice management,” Jerry Szilagyi, CEO of Strategy Shares, said in a note. “We see an industry ripe for innovation and Strategy Shares is committed to being a part of the evolution of ETFs.”

The ETF’s portfolio is plit into two equally-weighted categories, a Core Portfolio and a Dorsey Wright Explore Portfolio. The Core Portfolio includes a long-term focus with a 70% tilt toward U.S. aggregate fixed-income assets and 30% in U.S. large-capequities. Meanwhile, the Dorsey Wright Explore Portfolio is a tactical allocation with U.S. fixed-income, U.S. blend, U.S. equity and U.S. alternative assets, or categories that have historically provided high levels of income. Both halves are rebalanced on a monthly basis.

For more information on dividend strategies, visit our dividend ETFs category.