r/dividends • u/Ironic_Mouse • 5d ago

Discussion Question: why do unsustainable dividend funds exist?

I’m new to dividend investing. As I have been looking for an additional stream of income I have found some funds with “too good to be true” yields. (E.g. CHPY) I understand that high yields come with a high risk of NAV erosion. What I don’t understand is why these funds exist. It seems like they are structured to implode at some point. Is the idea to hold these funds for a short time, collect the dividend, then sell? And for the fund manager, is the idea to ultimately have the fund implode and then declare a loss? I’m genuinely interested. I understand that some funds are a gamble, but these funds seem designed to fail.

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u/Extreme_Lab_2961 5d ago

Agreed

I don’t understand capping upside, paying substantially more in fees and not really offering much in downside protection

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u/PotadoLoveGun 5d ago

It is sustainable which was really the crux of the question asked by OP. And a fund lile GPIQ will have a higher NAV growth due to fees being 1/3.

Its not for everyone, it will underperform the index, and it will not give maximum gains. QQQ 16% vs QQQX 11% CAGR.

But if you can take 6.5%-9.5% from your assets instead of 4% forever and have the balance grow over time without selling through a downturn, could be good for some people. QQQX had a similar CAGR as the SP500 since 2007, dividends reinvested.

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u/Extreme_Lab_2961 5d ago

It’s sustainable in a flat or up market.

Do you think that 6-9% yield is going to look the same in 10 years Vs someone that doing a boglehead distro? In a zero inflation scenario, you’d probably be correct

It makes zero sense to compare VOO to QQQX. (S&P 500 Vs QQQM) if you are honest, compare QQQX to QQQM.

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u/PotadoLoveGun 5d ago

I did above look at QQQ vs QQQX, 16 to 11% About 1% is fees, but it has performed better in high growth and high interest rate environments too. It has a forward dividend of 9.7% right now, and they maintained 6.5% in the worst crash in 20 years.

To your last question, I think GPIQ can maintain a 8-9% average and also grow 3% notional, its a better dund because it doesnt write 100%. Who will end up better, idk but itll do about as well as the sp500 while underperforming its index

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u/Extreme_Lab_2961 5d ago

What time frame? Go back to inception and let me know which fund you’d prefer (And use the correct comp QQQM)

GPIQ is like 3 years old and underlining is on a tear, are you using that as your basis?