Dissecting ULTY Distributions: Why the Drop is Healthy
A deep-dive analysis and a structured framework for understanding ULTY’s weekly payouts.
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After six weeks of paying out 10 cent distributions, the hot streak has come to an end for ULTY 0.00%↑. The recent distribution for 8/29 clocked in at $0.0949, a 5% drop from last week.
Some investors think that means the sky is falling alongside declining NAV, but the reality is that it’s a strategic maneuver from YieldMax — and one that is actually in the best interest of investors over the long run. Plus, let’s be honest… a couple of years ago 7-10% yield was all the rage and now some people are getting ruffled over the difference between 85% vs 90% annual yield.
I wanted to dig in more to try to understand their logic and leverage historic trends to help better predict how future distributions could evolve. In this article we’ll dive into ULTY, MSTY, and a new Distribution Pressure Index I’ve created to help monitor ETF health.
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To start, above is a simplified look at the weekly ULTY distributions compared to the NAV (based on each week’s close). NAV was quite volatile into the Liberation Day drop and subsequent bounce, but then it started stabilizing around mid-May as ULTY fully embraced the “ULTY 2.0” mechanics. Distributions also started to normalize around that time period too, eventually eclipsing 10 cents in July.
I chose this data set because it represents the last full-day data that YieldMax likely leverages before their meeting every Monday to determine the distribution values that get announced each Wednesday.
Considering the highly varied predictions across the community each week, it’s logical to presume that YieldMax’s decisions are partially based on the premium they harvest and part discretionary. I propose that using a distribution rate-based framework can provide stronger distribution predictability compared to predictions solely based on IV or income harvested.
Distribution Rate
By going one level deeper and analyzing the distribution rate (aka. annual yield) we can look through a renewed lens at YieldMax’s recent decisions and underlying strategy. It’s part art and part science as rates can fluctuate +/- a few percentage points around a “target” value.
Below is a plot of the ULTY distribution rate since going weekly in March 2025. This spotlights additional trends across two phases (excluding two outliers):
Phase 1: Even amid the Liberation Day volatility, the rate was averaged at roughly 80% from March to July.
Phase 2: The rate then took a leg-up in mid-July to an average of 85%.
Technically speaking, if we look historically at the last time ULTY’s NAV was in the $5.70s in April, the distribution rate was ~80% (vs. current 85%).
Potential reasons YieldMax increased the ULTY distribution rate to 85% in mid-July include:
Over a 3x increase in inflows vs prior weeks, providing the cash to scale the fund across multiple facets.
Bullishness on the market breaking out to new all-time highs in the weeks ahead.
Bullishness of top core holdings breaking out alongside strong IV (ie. ASTS 0.00%↑, HOOD 0.00%↑, COIN 0.00%↑…etc).
Observation that underlying stock performance regularly offset (and sometimes surpassed) the ex-div drop on a weekly basis (aka. more opportunity to scale income while sacrificing NAV appreciation).
Before we go further, it’s important to note that ULTY is not a target yield fund, unlike YieldMax’s Target 12 (and upcoming Target 25) ETFs which seek to achieve specific yield. It’s also worth the reminder that the primary objective if ULTY is weekly income and the secondary objective is share price gains based on the underlying stocks.
That said, the distribution rate still matters and is a key performance indicator that YieldMax keeps an eye on as they actively manage all their funds — this has been mentioned multiple times by Jay Pestrichelli, CTO at Tidal Financial Group.
Performance Analysis/Strategic Decision Making
Combining all these data points together, we can start to the see the big picture. The chart below illustrates the historical distributions alongside forecasted distribution values at a 80% and 85% yield. This chart offers a potential glimpse at strategic decision making YieldMax deployed — trying to keep the 10 cent distribution for as long as possible and why they dropped it this week.
Hedging Their Bet
The jump up to an 85% distribution rate (and 10 cent payout) in mid-July was well justified by the ETF’s increasing scale (inflows) and overall market performance. However, starting August 1st we start to see the first signs of deviation (black line vs dotted pink line) and where YieldMax potentially started to hedge their bets.
The conservative play would have been to lower the distribution below 10 in early August. Why didn’t they do that? The answer is likely 2-fold:
Investor sentiment: being able to deliver a steady 10 cents per week at an 85%+ annual yield is very eye-catching for investors looking to maximize weekly income.
Hedging their bet that the stock market and ULTY’s NAV would recover to support the distributions rates. After all, when dealing with a $3B AUM fund, you have to give some breathing room over multiple weeks rather than making knee-jerk reactions (since whiplash could disrupt point #1).
Unfortunately, it was poor timing. In early August, the market started to lose favorability. Not only did SPY 0.00%↑ have a volatile drop at the start of the month, but the underlying stocks in ULTY started to pull back significantly (including ASTS 0.00%↑, COIN 0.00%↑, MSTR 0.00%↑, SMR 0.00%↑ and others) — which we had called out might happen sooner rather than later:
The Drop Below 10 Cents
Over the course of the next four weeks, the unfavorable macro conditions remained. Although the broader markets climbed higher, each multi-day pull back compounded on top of continued performance decline of the ULTY underlying. And after holding out for as long as possible, YieldMax ultimately needed to make the tough call to lower the distribution, which brought it back in line to 85%.
As a reminder, the fund is long underlying stocks which account for upwards of 90% weight of the net assets. Regardless of positive or negative options trades day-to-day, NAV is most impacted by the performance of the underlying vs the mechanics of the ETF — and it feels the impact more to the downside than upside.
If they had kept the August 29th payout to another dime, it would have pushed the distribution rate higher to 90% — which just simply couldn’t be justified given all the factors at play (now and potentially in the future).
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Comparison to MSTY
As a quick comparison I also analyzed YieldMax’s largest ETF, MSTY 0.00%↑, using a similar framework. While MSTY is a single-stock ETF and is slightly different than ULTY, I believe similar distribution rate decision making logic may apply.
The NAV for MSTY 0.00%↑ has dropped significantly overtime — driven by the degradation effect of covered call ETFs when the underlying experiences volatile performance. Even the year-over-year total return favors MSTR.
It appears that in recent months (excluding peak volatility-driven outliers), the ETF is trying to stabilize the distribution rate at roughly 70-75% — but we’ll have to monitor that depending on how the crypto sector performs the rest of the year.
Note: YieldMax is aiming to launch a Target 25 Bitcoin fund, which could provide investors less yield, while being more stable and providing potentially more upside capacity in regards to NAV appreciation.
Prediction: If MSTY’s NAV remains at roughly $15 by September 19th, there’s a chance the distribution announced on Sept 24th would be ~$0.87 — if aligned to a 70% distribution rate.
Future Predictions
Jumping back over to ULTY 0.00%↑, we’ll have to closely monitor things moving forward — especially knowing September is often the weakest month for the stock market. This past week was strong overall, triggering a small rally with inflows, and setting a price range for the ETF between $5.81 and $5.55. If the NAV breaks down below that, there may be a need for YieldMax to drop the distribution even more. This is healthy in the long run, as a defensive mechanic, and we can presume that once an uptrend is confirmed the rates can start to increase again.
Based on these findings, I will soon be launching a new Distribution Pressure Index tracker. While there will always be a discretionary element to YieldMax’s decisions, this tracker can help with more accurate forecasting and is another tool in our toolbelts to monitor the overall health of the ETF.
Paid subscribers get a sneak peek and an initial analysis of the tracker, which accurately predicted that this week’s distribution would be below 10 cents and theorizes what could happen next week. Let’s dive in more below.