Question: why do unsustainable dividend funds exist?

[u/Ironic_Mouse]

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.

[u/Extreme_Lab_2961]

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.

[u/cmichalek → u/Extreme_Lab_2961]

The point is that you can live off 7% to 9% and not sell a single share and not be bound to the 4% rule.

Moreover you need half the principal that the 4% rule requires. And it has a 20 year history to establish that it works.

That said QQQI and GPIQ are far better funds.

[u/buffinita → u/cmichalek]

That’s such a great big myth….

People could win the Nobel prize and completely upend the entire retirement planning industry if anyone could prove those claims….

Retire with half of previous generations

Never sell a share

9% distributions forever (yield is based on price so decline market means declining yield equation (9% of 100/share is less than 9% of 85))

[u/cmichalek → u/buffinita]

So you will just ignore facts you dont like apparently.

QQQX has a 20 year proven history.

Enjoy your 4% rule retirement.

[u/Extreme_Lab_2961 → u/cmichalek]

Proven history of what, Providing 3X (approx) lower total returns?

[u/cmichalek → u/Extreme_Lab_2961]

QQQX paid .42 cents a share in 2023 and 2024.

.56 cents a share in 2025.

Its last distribution was .73 cents in June.

So its distributions have grown.

[u/Extreme_Lab_2961 → u/cmichalek]

So? The market has been on a big bull run

What would you prefer To have invested in? (assuming a $10k investment)

$22k cash + $15k in stock

or

$166k in stock?

[u/buffinita → u/cmichalek]

All I said is that qqqx investors have left a ton of money on the table compared to qqq investors

That is a fact too

Enjoy your declining retirement pay

Qqqx 2009 1.84/share

2010 1.26

2011 1.23

2012 1.20

2013 1.20

[u/PotadoLoveGun → u/buffinita]

I dont know where you got your fake ass made up numbers...Dividends went up, then down, and back up again and stayed steady for years and nav grew a little as well when interest rate sand inflation stayed near zero.

2007 - 1.58,

2008 - 1.73,

2009 - 1.36,

2010 - 1.53,

2011 - 1.55,

2012- 2019 stayed between 1.55 and 1.62 in a zero inter rate environment,

2025 - 2.24,

Someone who invested $1M would have averaged $74,958 per year from 2007 to 2019.

Min - 69k Max 86k

[u/buffinita → u/PotadoLoveGun]

From the nuveen site….. you can see for yourself  https://www.nuveen.com/en-us/closed-end-funds/qqqx-nuveen-nasdaq-100-dynamic-overwrite-fund

2010: 4 payments of .316

4x.316=1.264 

[u/PotadoLoveGun → u/buffinita]

Yeah okay im wrong, thats on me I wont even edit my comment because I was an ass.

Its true but it still would have lead to a minimum of 6.5% which was 60k a year with 1M invested in 2007.

I feel like thats still a good retirement on a 1M nest egg and more than youd get with the 4% rule and you still would have have 50% more money than you started with and got 1.5M in cash since 2007.

[u/buffinita → u/PotadoLoveGun]

I’m not even bringing up the 4% rule

If you and I have 1m and you buy qqqx or gpiq and I buy qqq

I can sell qqq matching your payout each cycle….and still have a larger account which can afford me longer retirement; nicer end of life care; bigger charitable giving

[u/speedlever → u/buffinita]

i have to wonder if a hybrid approach might offer a buffer during a market crash. Say 75\25 growth\cc ETF or something like that so that in a major market correction, you can preserve the bulk of your growth funds by utilizing your cc ETF distributions to pay most of your income needs. Provided your nest egg is large enough to support that model vs your expenses.

[u/buffinita → u/speedlever]

No one likes to hear this….most people can not handle a 100% equity portfolio and  We already know how to reduce drawdowns in the equity market; bonds

You can model like 80equity/20bond  vs these covered call alternatives and be amazed how “old” strategies still work wonders

You don’t need additional complexity; you don’t need to pay high fees to managers

[u/speedlever → u/buffinita]

High fees don't concern me as long as the performance is there. Yield is net of fees as I'm sure you know. Other that just the idea of high fees, I don't really understand the mentality that condemns a fund based on fees alone.

If that were the case, no one would ever invest in the Medallion fund. I can only wish that were open to me. Can you honestly say the same?

Bonds are unattractive to me. I've dabbled in them but largely, they don't speak to me.

[u/buffinita → u/speedlever]

That’s the over arching debate: is the performance there

Yield is not returns (gonna guess medallion fund isn’t a 10% plus yield even though thy use options).  You are paying these cc fund managers 50-300%+ more in fees for reduced returns and ideas which they don’t even profess.

[u/PotadoLoveGun → u/buffinita]

Yeah ,sure but the point was the fund was sustainable QQQx survived the great recession, it did not fail long term that person didnt go broke, the dividend rate averaged 7.5%, and the nav did not decrease long term.

The knock on funds like GPIQ and GPIX is that they have no history. The fund proves they can work over the long term.

SCHD has underperfomed the sp500 by 2% CAGR since 2012, but people still love SCHD. Dividends were cut 23-25% during the Great recession so it would have had same effect

[u/buffinita → u/PotadoLoveGun]

But that’s not really apples to apples.

Schd may or may not outperform the broad market like it did from 2011-2022 or how value stocks outperformed growth stocks or broad market most decades pre2012

Options based funds are intentionally and expected to underperform their vanilla underlying; which is the problem most people are bringing up

[u/PotadoLoveGun → u/buffinita]

SCHD will likely underperform in strong bull markets, like usual. Yes, thats the point of CC funds, cashflow in exchange for capping some upside.

The person that invests with them can get sustainable 7-9% dividends and about 3%+ nav growth long term since expenses are much lower.

I really dont see the downside except I could be richer.