Many exchange-traded funds (ETFs) offer competitive annual fees—the influx of hundreds of new products to the space in recent years has driven expense ratios for many types of funds downward in a bid to attract investors.
Most investors looking at the ETF market will not settle for a moderately high expense ratio unless that ETF provides substantial returns, an unusually complex or unique investment strategy, or a niche focus unavailable elsewhere.
Increasingly, investors are expecting even more from their ETF investments. Besides low cost—and the potential for compelling returns—ETFs that offer a strong dividend yield further distinguish themselves from the rest of the market.
These funds provide the best of both worlds: a low annual fee to keep investor costs down, plus a history of distributions that can help to facilitate a steady passive income stream, regardless of returns.
Covered Call Approach for Massive Yields
[content-module:CompanyOverview|NYSEARCA:ULTY]The YieldMax Ultra Option Income Strategy ETF (NYSEARCA: ULTY) is an example of a fund providing an especially compelling and complex strategy that may make its higher expense ratio worthwhile for investors seeking passive income.
ULTY uses an active management approach to generate a covered call strategy on U.S.-listed securities. Though it provides indirect exposure to some 15 to 30 securities, its strategy caps gains to the share price returns of those companies.
The net expense ratio for ULTY is 1.14%, thanks to an ongoing fee waiver of 0.1% from the fund provider. But where ULTY shines is in meeting its goal of providing option income. As of March 21, 2025, the fund has a dividend yield of an astonishing 162.4%.
While it typically makes one distribution per month, as of that date it has offered three distributions for the month of March alone. In highly volatile periods, when the potential (and risk) for covered calls is greater, ULTY can thrive.
Betting on Tesla's Decline, With Major Distribution Implications
[content-module:CompanyOverview|NYSEARCA:CRSH]Another fund by provider YieldMax, the YieldMax Short TSLA Option Income Strategy ETF (NYSEARCA: CRSH), may be particularly attractive for investors bearish on Tesla Inc. (NASDAQ: TSLA). Also actively managed, CRSH utilizes a complex synthetic covered put strategy while also offering indirect short exposure to the share price of TSLA.
The result is that CRSH aims for limited returns when the price of TSLA shares drops. It also aims to cap losses if TSLA shares increase in value, although the extent of the loss protection depends on whether TSLA stock rises to the strike price of CRSH's call options.
Given Tesla's recent significant challenges, investors expecting more of the same might consider CRSH as a way of benefiting, indirectly, from this ongoing saga in the electric vehicle space. Indeed, CRSH is up nearly 50% year-to-date as of March 21. However, the real draw for most investors is CRSH's history of distributions.
The fund pays an annual dividend yield of 86.2% based on its monthly distribution schedule. Like ULTY above, given the complex nature of CRSH it is a highly risky investment, though the potential for passive income on a moderate expense ratio of 0.99% is great.
A Bitcoin-Linked Dividend Play
[content-module:CompanyOverview|NYSEARCA:BITO]For a different strategy that nonetheless provides a compelling distribution, consider the ProShares Bitcoin Strategy ETF (NYSEARCA: BITO). Although BITO was the first ETF linked to Bitcoin, it does not invest directly in BTC. Rather, it uses a futures and swap strategy to produce results corresponding to Bitcoin's performance.
At an expense ratio of 0.95%, BITO is not the cheapest fund targeting Bitcoin. However, its monthly distributions and an annual dividend yield of 76.7% make it particularly compelling for investors looking to track the price of Bitcoin while enjoying passive income in the process.
Of course, given the extreme volatility that still impacts the cryptocurrency space, BITO remains a risky investment. However, the focus on dividends may appeal to investors seeking some assurance of income beyond a direct play on Bitcoin itself.
Although BITO is down more than 11% alongside Bitcoin's slump early in 2025, it remains up more than 18% in the last year as of March 21.
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