The Montrose Monthly ETF (Sweden’s first) has grown rapidly in popularity, but its launch on the stock exchange has perhaps not been a sunny one due to current cumstances.
What happens to Montrose dividend in volatile market?
For a regular stock, the dividend yield would of course have risen when the price goes down and the dividend doesn’t go down. In Montrose’s case, we have to think a little differently.
The ETF always aims to generate a 6% dividend yield. Some of the dividend comes from the underlying assets, but the majority comes from the premium you take when writing options. The premium is based on how volatile the market is at the moment.
The goal of Montrose Monthly is to give you a 6% yield and base the premium you receive on how prices tend to fluctuate. However, no dividend is guaranteed and this is just a goal and nothing more. Therefore, a 6% yield (0.5% monthly) cannot be guaranteed.
One “advantage” is that Montrose’s dividend yield is significantly lower than many other Covered Call ETFs that have offered around 10% after the pandemic. Unfortunately, this has not been sustainable in many cases. When you instead offer 6%, you can more easily cover this and hopefully the dividend will be more sustainable over time.
I will make a small purchase and start building up…
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