With Treasury yields at rock bottom levels and investors enduring widespread dividend cutting within the S&P 500 this year, finding adequate income is becoming challenging. One way to solve that scenario is to embrace unique ideas, including the Strategy Shares Nasdaq 7 Handl Index ETF (HNDL).
HNDL seeks investment results that correlate generally to the price and yield performance of the NASDAQ 7 HANDL™ Index. The index consists of securities issued by exchange-traded funds (“ETFs”) and is split into two components, with a 50% allocation to fixed income and equity ETFs (the “Core Portfolio”) and a 50% allocation to ETFs of 12 asset categories (the “Explore Portfolio”).
The Long-Term focus part of the HNDL portfolio includes allocations to broad-based, cost-efficient fixed income ETFs as well as equity funds, such as the Invesco QQQ Trust (QQQ ).
“The Nasdaq 7HANDL ETF has adopted a policy to pay monthly distributions on Fund shares at a target rate that represents an annualized payout of approximately 7.0% on the Fund’s per-share net asset value on the date of a distribution’s declaration,” according to StrategyShares. “All or a portion of a distribution may consist of a return of capital from the original investment and the distribution rate may be modified at any time.”
High Regard for HNDL
The underlying index seeks to offer the potential for high monthly distributions while maintaining a stable net asset value over time.
The ETF’s portfolio is split into two equally-weighted categories, a Core Portfolio and a Dorsey Wright Explore Portfolio. The Core Portfolio includes a long-term focus with a 70% tilt toward U.S. aggregate fixed-income assets and 30% in U.S. large-cap equities. Meanwhile, the Dorsey Wright Explore Portfolio is a tactical allocation with U.S. fixed-income, U.S. blend, U.S. equity and U.S. alternative assets, or categories that have historically provided high levels of income. Both halves are rebalanced on a monthly basis.
One of the components in the Dorsey Wright sleeve of the HNDL portfolio is the Global X Nasdaq 100 Covered Call ETF (QYLD ).
QYLD is an income-generating spin on the Nasdaq-100 Index (NDX), an index lightly allocated dividend-offending sectors, such as energy and real estate while heavily allocated to leaders with strong balance sheets, such as the technology and communication services sectors. QYLD’s income is derived from writing covered calls on the NDX.
A covered call refers to an options strategy where an investor writes or sells a call option on an asset which they already own or bought on a share-for-share basis to generate income via premiums derived from the sale of the call options.