RYLD Dividends For Passive Income

Why RYLD has become part of my Passive Income Portfolio as I work toward $100,000/year in Passive Income!

RYLD Dividends For Passive Income
Photo by Johnny Brown / Unsplash

I continue to collect dividend producing stocks and ETFs on my journey to generate $100,000 a year in Passive Income. Earlier this month I picked up $RYLD, another covered call writing ETF that invests primarily in the Russell 2000. This one has a higher Beta though, so I'm taking on more risk but I've kept my initial purchase small.

Stock Price

RYLD is trading at its all-time highs. Everyone is thinking the Bull Market is getting a bit long in the tooth and are starting to wonder when the Biden bump will fade away. I don't think that's going to happen until after another round of stimulus.

RYLD broke out of its resistance at $21.50 and it's looking to get a bit top-heavy. The general market is waiting for President Biden to start working on the stimulus.


RYLD has a very high dividend yield, around 11%, and it pays a monthly dividend. As I've written before, this is a nice thing to have if you want income every month instead of waiting for $JNJ to payout every 3 months. From the looks of it, the dividend is still growing right now.

It does have a high expense ratio, which is right below my limit of 0.80%. Its current expense ratio is 0.78%. Anything higher and I'd have to write covered calls! Still, I'm willing to make an exception to gain access to a strategy that amps up my monthly dividends!

Passive Income Risks

Whenever I make a Buy or Sell decision in my investments I always think, "What Would Sun Tzu do?" It's a silly thing to ask but his philosophies have guided me to my financial success. After reading Sun Tzu's Art of War (affiliate link), I learned that you win wars by engaging the enemy with your ordinary troops but win by using extraordinary troops. RYLD, and QYLD are my extraordinary troops.

The risk to me is price depreciation and a collapse of the general market. While we're overdue for a big pullback, reinvesting these dividends in my Roth IRA makes a lot of sense from a dollar-cost averaging standpoint. Plus the other risk is that an ETF is a basket of stocks, some have unstable dividend histories and could stop paying them altogether in times of market turmoil.

Still, I like this ETF. Over time it will be the icing on my passive income cake.

Updated for 2024

When I last wrote about RYLD (Global X Russell 2000 Covered Call ETF) above, my focus was on how it had become a cornerstone of my passive income strategy through its consistent dividends. In that December 2020 piece, I outlined why RYLD's approach to generating income resonated with my investment philosophy, especially in an unpredictable market.

Fast forward to January 2024, and you might wonder: With the market's roller coaster ride these past years, do I still hold RYLD in my portfolio? The answer is a resounding yes!

Despite some short-term underperformance, which is not uncommon in any investment, my belief in RYLD's role in a long-term passive income strategy remains unshaken.

(c) Author

Why RYLD remains a key component in my portfolio

One of the most attractive features of RYLD is its monthly dividend payout. In a world where most dividends are quarterly, this regularity aligns perfectly with my strategy for future monthly passive income needs.

It's about creating a steady stream of income, mirroring the consistency of monthly expenses or savings goals. I like that a lot!

This monthly distribution model not only provides a predictable cash flow but also offers opportunities to reinvest dividends more frequently, potentially compounding growth over time.

Moreover, RYLD's high dividend yield, which stands around 12%, is a significant factor in its appeal. In the landscape of investment options, a yield as robust as this is somewhat of a rarity, especially when you consider the balance between risk and return.

This high yield has been instrumental in cushioning any short-term market fluctuations, ensuring that my investment continues to work for me even when the market takes a dip. It's this kind of resilience that makes RYLD an invaluable part of my portfolio.

Since my initial investment in RYLD, the journey hasn't been without its ups and downs – a characteristic of any market-linked investment. However, the consistent dividend payments have been a reassuring factor. They serve as a reminder that while the market's short-term movements are unpredictable, my long-term strategy remains on track.

The dividends have not just been numbers on a statement; they have been tangible returns that support my financial goals.

Analyzing short-term underperformance

It's crucial to understand the broader market dynamics when assessing RYLD's recent performance. The past few years have been a testament to market volatility, influenced by a myriad of factors ranging from global economic uncertainties to domestic policy shifts. In such an environment, it's expected that even well-established funds like RYLD will experience some degree of fluctuation.

While RYLD has shown short-term underperformance relative to some market indices, it's important to contextualize this within the overall market conditions. Given the fund's strategy and composition, its performance trajectory won't always mirror that of the broader market. However, this divergence should not be hastily labeled as a red flag, but rather viewed as part of a longer-term strategy.

(c) Author

A key consideration for any investor receiving high dividends is the sustainability of these payouts. In the case of RYLD, despite its short-term underperformance, I don't view its high dividend yield as a "dividend trap."

This term is often used to describe a situation where a high yield is unsustainable and potentially misleading. RYLD's track record and the underlying strategy give me confidence that its dividends are not just a lure but a sustainable aspect of its performance.

The future outlook of RYLD

When investing for dividends, especially with a view towards passive income, a long-term perspective is essential. Short-term market movements are often just noise in the grand scheme of things. By maintaining focus on the long-term potential and the ongoing income stream, temporary underperformance becomes less concerning, particularly when the underlying fundamentals of the investment remain sound.

Interestingly enough, RYLD has a strong seasonal trend between May and October.

(c) Author

Looking ahead, the potential for RYLD remains promising. Given its history and the inherent strength of its strategy, RYLD is well-positioned to capitalize on market recoveries and growth phases. Its focus on Russell 2000 companies offers a unique blend of exposure to small-cap stocks, which historically have rebounded with vigor post-market downturns.

This positions RYLD not just as a source of steady dividends but also as a vehicle for potential capital appreciation over the long term.

My rationale for continuing to hold RYLD is twofold. Firstly, the consistent monthly dividends play a critical role in my passive income strategy. This regular income stream, particularly at a high yield, is a significant factor in my investment decisions. Secondly, I believe in the long-term potential of the fund. Despite short-term market fluctuations, the fundamentals of RYLD's strategy align with my investment philosophy of patience and persistence.

I anticipate that as markets stabilize and grow, RYLD will continue to be a valuable component of my portfolio, not only for the income it generates but also for the potential capital growth it offers. It's about seeing beyond the immediate horizon and understanding the bigger financial picture.

End notes

In wrapping up, my journey with RYLD underscores a fundamental principle in investing: focusing on long-term goals rather than being swayed by short-term market movements. Despite its recent underperformance, RYLD remains a pivotal asset in my portfolio, primarily due to the significant role it plays in my passive income strategy. The monthly income it generates is not just a number; it's a key part of my financial planning and future security.

My continued hold on RYLD is a testament to my belief in its strategy and my commitment to a long-term vision.

Disclosure: Still Long

The Fine Print

Terms of Service | Disclaimer | Affiliate Disclaimer