I continue to collect dividend producing stocks and ETFs on my journey to generate $100,000 a year in Passive Income. Earlier this month I picked up $RYLD, another covered call writing ETF that invests primarily in the Russell 2000. This one has a higher Beta though, so I’m taking on more risk but I’ve kept my initial purchase small.
Stock Price
RYLD is trading at its all-time highs. Everyone is thinking the Bull Market is getting a bit long in the tooth and are starting to wonder when the Biden bump will fade away. I don’t think that’s going to happen until after another round of stimulus.
RYLD stock price chart
RYLD broke out of its resistance at $21.50 and it’s looking to get a bit top-heavy. The general market is waiting for President Biden to start working on the stimulus.
Dividends
RYLD has a very high dividend yield, around 11%, and it pays a monthly dividend. As I’ve written before, this is a nice thing to have if you want income every month instead of waiting for $JNJ to payout every 3 months. From the looks of it, the dividend is still growing right now.
RYLD fundamentals
It does have a high expense ratio, which is right below my limit of 0.80%. Its current expense ratio is 0.78%. Anything higher and I’d have to write covered calls! Still, I’m willing to make an exception to gain access to a strategy that amps up my monthly dividends!
RYLD fundamentals
Passive Income Risks
Whenever I make a Buy or Sell decision in my investments I always think, “What Would Sun Tzu do?” It’s a silly thing to ask but his philosophies have guided me to my financial success. After reading Sun Tzu’s Art of War(affiliate link), I learned that you win wars by engaging the enemy with your ordinary troops but win by using extraordinary troops. RYLD, and QYLD are my extraordinary troops.
The risk to me is price depreciation and a collapse of the general market. While we’re overdue for a big pullback, reinvesting these dividends in my Roth IRA makes a lot of sense from a dollar-cost averaging standpoint. Plus the other risk is that an ETF is a basket of stocks, some have unstable dividend histories and could stop paying them altogether in times of market turmoil.
Still, I like this ETF. Over time it will be the icing on my passive income cake.
Disclosure: No Positions in RYLD (4/23/25)