Mirae Asset Management Launches ETF with 12% Annual Dividend... "Focus on Sustainability Instead of Overdistribution"

Mirae Asset Global Investments has launched a monthly dividend covered call ETF that invests in the same stocks as SCHD (U.S. Dividend Dow Jones), a U.S. dividend exchange-traded fund (ETF), targeting an annual dividend yield of up to 12%.

Namgi Kim, Vice President of Mirae Asset Global Investments (Head of ETF Management Division). Photo by Hyunseok Yoo

On the 20th, at a press conference held in Yeouido, Seoul, Lee Kyung-jun, Head of Strategic ETF Management at Mirae Asset Global Investments, stated, "We will not participate in excessive distributions without innovation," adding, "We will ensure sustainability by maintaining the principal while continuing distributions."

The TIGER U.S. Dividend Dow Jones Target Daily Covered Call ETF is characterized by reducing the option selling ratio to below 10% through a 'daily option' strategy. Dividends are paid on the 15th of each month (or the preceding business day if the 15th is not a business day).

Lee Kyung-jun explained, "The TIGER U.S. Dividend Dow Jones Target Daily Covered Call ETF is the final version of the U.S. Dividend Dow Jones Covered Call ETF, which has been steadily loved by domestic investors since its listing in 2022," and added, "The key point is maintaining the lowest option selling ratio despite paying substantial dividends."

He emphasized, "An annual distribution limit of 12% was only possible by selling more than 50% of the stocks through monthly options," and continued, "By using ultra-short-term options trading (0DTE, Zero Day to Expiration), we were able to reduce the option ratio to around 10% relative to stocks."

Lee highlighted that sustainability is the most important aspect of covered call ETFs. According to Mirae Asset, in the past, covered call funds in the Japanese market grew to a large scale exceeding 44 trillion yen. However, the scale later halved. This was due to Japanese covered call fund managers engaging in excessive distribution rate competition.

He explained, "In 2022, 30% of the 1,100 monthly payout funds in Japan deducted the entire dividend amount from the investment principal," adding, "An event comparable to a Ponzi scheme (multi-level financial fraud) occurred in the Japanese market."

Therefore, he advises that when selecting covered call products, one should check whether the dividend is set excessively high. He said, "When monthly payout funds were very popular in Japan in the past, excessive dividend competition arose, ultimately damaging the principal. This should serve as a cautionary lesson," and added, "Recently, various target distribution rate products have been launched in the domestic covered call ETF market, but investors should be cautious of excessive dividends that exceed the growth potential of the underlying assets."

He stressed, "Maintaining an appropriate distribution rate to secure sustainability is truly important," and said, "Although there is a distribution resource of 13.5%, we lowered the distribution limit to 12% so that this product can provide sustainable cash flow to investors even 10 or 20 years from now."

With the listing of the 'U.S. Dividend Dow Jones Target Daily Covered Call ETF,' Mirae Asset Global Investments has completed its lineup of U.S. representative index-type target daily covered call ETFs. The lineup includes four types: 'TIGER U.S. S&P 500 Target Daily Covered Call,' 'TIGER U.S. Nasdaq 100 Target Daily Covered Call,' 'TIGER U.S. AI Big Tech 10 Target Daily Covered Call,' and 'TIGER U.S. Dividend Dow Jones Target Daily Covered Call.' Through this, a stable retirement solution based on monthly dividend ETFs investing in various high-quality U.S. stocks can be established.

Kim Nam-gi, Vice President and Head of ETF Management at Mirae Asset Global Investments, said, "As the aging population increases, interest in monthly dividend ETFs for retirement funds is growing. Monthly dividend ETFs should be invested in with a strategy that combines cash flow and growth," and added, "We will continue to develop innovative products through TIGER ETF’s unique know-how and strive to become a long-term investment partner for investors."

This content was produced with the assistance of AI translation services.