Key Highlights

  • Amplify CEF High Income ETF (YYY) offers an 11.4% dividend yield but trails the S&P 500 by 5.7% annually over three years.
  • JPMorgan Equity Premium Income ETF (JEPI) posts a 3-year alpha of -3.4% against the S&P 500’s +77% return.
  • High-yield ETFs rank in the bottom 40% for total returns despite outsized dividend payouts.

High-yield exchange-traded funds are luring income investors with double-digit dividend yields, but their total returns are falling short of broader market benchmarks. The trade-off between immediate income and long-term growth has left these funds trailing the S&P 500 by as much as 11.5% annually, raising questions about their role in diversified portfolios.

What Happened

A review of US-focused equity ETFs reveals a stark performance gap between high-yield funds and the S&P 500. The Amplify CEF High Income ETF (YYY) delivers an 11.4% dividend yield but has returned just +41% over three years, compared to the S&P 500’s +77%. Even the JPMorgan Equity Premium Income ETF (JEPI), which uses a covered call strategy, underperforms with a 3-year alpha of -3.4%.

Market Impact

The underperformance of high-yield ETFs highlights a structural trade-off: investors prioritizing income over capital appreciation may sacrifice long-term gains. Funds like YYY and RYLD, which rank among the top five for dividend yield, land in the bottom 40% for total returns. RYLD’s beta of 0.59 suggests lower volatility, but its returns still fall short of the S&P 500’s benchmark.

Advisors may need to recalibrate client expectations, particularly for those relying on these ETFs for retirement income or portfolio stability.

What's Next

As interest rates remain elevated, demand for high-yield ETFs could persist, but their underperformance may prompt investors to reassess their allocations. Funds offering yields up to 4.50%, while still trailing the S&P 500, might gain traction as a middle-ground option. The data underscores the need for transparency around the hidden costs of chasing yield, particularly in strategies that rely on options or closed-end funds.

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.