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Geoff Considine » Comments » CVY

  • CVY Looks to Double the Yield of Other Dividend-Paying ETFs [View article]
    Oh my...covered call writing funds as a source of yield are a bid dodgy IMHO. The article above says that this is a 'potentially high yielding strategy.' Yeah--and also potentially a low yielding one. I do not work for the SEC, etc., but treating income from selling covered calls as dividends has always seemed dodgy to me. The premium that you receive is not the same as earnings from a company distributed as dividends. The covered call writer has sold a contingent claim that can potentially be 'called' in the future. Dividends, assuming unleveraged, are from past *actual* earnings against which there is no future claim.

    See my previous articles on these funds at:

    etf.seekingalpha.com/a...
    etf.seekingalpha.com/a...

    Peter Lynch said 'buy what you know.' An obvious extension to this is 'don't buy what you don't understand.' Many investors and advisors that I have encountered really do not grasp the difference between selling covered calls and true dividend income. There is a big difference.
    Oct 30 15:21 pm |Rating: 0 0 |Link to Comment
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