Over just a few years, ETFs using covered call strategies to generate income and dividends have become a massive phenomenon. These funds fall into two broad categories. There are covered call ETFs that use index ETFs or actively managed portfolios as their underlying assets, and there are single-stock covered call ETFs.

The latter gives investors an exciting way to play popular individual stocks. Recently, one of my newsletter subscribers inquired about an ETF that utilizes Netflix (NFLX) as its underlying asset. In fact, there are two ETF sponsors that offer NFLX covered call ETFs. Here they are with their current distribution yields:

• Kurv Yield Premium Strategy Netflix (NFLX) ETF (NFLP), current distribution yield: 16.28%
• YieldMax NFLX Option Income Strategy ETF (NFLY), current distribution yield: 47.22%

The difference between the two yields is dramatic. It’s also important to note that these ETFs pay monthly dividends, and the yields can change significantly from month to month. That said, the YieldMax ETFs always have higher yields than the Kurv ETFs covering the same stocks.

When comparing the comparable ETFs from Kurv and Netflix, total returns tell the tale. The Kurv ETFs were launched on October 26, 2023, allowing us to chart comparative total returns from that date. Ycharts produces excellent charts that show both share price changes and total returns. Here is the chart comparing NFLP and NFLY.

The two ETFs ultimately took very different paths to achieve similar total returns.

The NFLP share price is up 65.31% and the monthly dividends bring the total return up to 131.2%.

The NFLY share price has gained just 9.61% over the past 20 months. However, the significant yield has produced a total return of 145.8%. 

The total returns are close enough so that the “winner” between these two could flip-flop every few months. As an investor, your choice ultimately comes down to whether you prefer to see nice share price gains in your brokerage account or earn substantial dividends.

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