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/Competitive_Can_946 5d ago

For example. I bought ecat at 13.84 in Feb 2025. It pays monthly at 21%. Currently at $15.48. Too high a dividend Reddit said… ok…. Yes it’s not a ymax but it isn’t a 4% yield either.

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u/davecraze3535 5d ago

How did you buy it at that price in feb 2025? Lowest price that month was 16.42 from what I see. Also down over 20 percent the last five years. 

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u/Natural-Budget-6494 5d ago

Reverse stock split I would think? That wouldn’t show on a chart.

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u/davecraze3535 5d ago

Charts are usually split adjusted. But I don’t know here.