How have single-stock yield ETFs performed so far?

There is also the tax-efficiency side to consider. Unless you are holding these ETFs inside a registered account such as a tax-free savings account (TFSA), registered retirement savings plan (RRSP), or another tax-sheltered account, those distributions may create tax liabilities. 

Depending on the structure, distributions can consist of return of capital, dividends, ordinary income, or capital gains. Return of capital is common with covered-call strategies and lowers your adjusted cost base, but that does not mean taxes disappear forever. They are often deferred instead.

I bring this up because Canadian ETF providers have increasingly launched concentrated income products tied to single stocks, often using moderate leverage and covered-call overlays. Purpose Investments calls them Yield Shares, Harvest ETFs markets them as High Income Shares, and Ninepoint Partners has its High Shares lineup. If you spend enough time on Reddit, YouTube, or finance websites, you have probably seen advertisements for them.

The pitch is straightforward. Instead of spending, say, US$41,700 to buy 100 shares of Microsoft and then selling covered calls yourself, you can buy a single-stock yield ETF that does the work for you. The ETF pools investor capital, buys the underlying shares, often adds between 1.25 and 1.33 times leverage through borrowing, and then sells covered calls to generate premiums.

On the surface, it sounds attractive. You get exposure to a blue-chip company you already like while collecting regular monthly income along the way. But total return is what ultimately matters. After reinvesting distributions, are you actually doing better than simply buying and holding the stock itself?

That is the question I wanted to test. So, I compared two of the older single-stock, covered-call ETFs against the underlying stocks they are built around, and an equivalent Canadian Depositary Receipt (CDR). Bottom line up front: the results were mixed.

How do these single-stock yield ETFs work?

For this experiment, I focused primarily on the lineup from Purpose Investments because they were among the earliest providers to launch single-stock yield ETFs in Canada in 2022. Competing products from providers like Harvest ETFs and Ninepoint are still relatively new and do not yet have long enough track records for meaningful analysis.

I also intentionally focused on large-cap U.S. technology stocks because these are the types of companies that tend to attract covered-call strategies in the first place. There are a few reasons for that. 

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First, the underlying shares are highly liquid, meaning options markets on them are extremely active. Investors get access to tight bid-ask spreads, multiple expiration dates, and a wide range of strike prices. Secondly, many of these stocks are volatile enough that selling covered calls can generate substantial option premiums, which makes them lucrative.

The first example I looked at was the Purpose Alphabet (GOOGL) Yield Shares ETF (YGOG), which is built around Alphabet. As of May 7, 2026, Purpose advertised a 10.69% distribution yield on YGOG. That figure is calculated by annualizing the ETF’s most recent monthly distribution relative to its NAV.

Structurally, YGOG is fairly straightforward. The ETF holds shares of Alphabet directly while applying 25% leverage. In practice, that means for every $100 of investor capital, the fund manager borrows an additional $25. On top of that, the ETF systematically sells covered calls on up to 50% of the portfolio. That helps generate income while still retaining some participation if Alphabet shares continue rising.

None of this is cheap. The ETF’s base management fee is 0.40%, but after accounting for leverage costs and other operational expenses, the actual management expense ratio (MER) rises to 1.71%, which is quite expensive compared to simply holding the stock itself.

What the back-test data says

I backtested YGOG from January 2023 through April 2026 against two alternatives: simply buying and holding Alphabet (GOOGL) shares directly, and buying the Canadian depositary receipt version, the Alphabet CDR, which trades in Canadian dollars.

The CDR does not charge an explicit management fee, but it still experiences ongoing drag from currency hedging costs and foreign withholding taxes on dividends, though in Alphabet’s case the dividend component is minimal given the company’s relatively small payout.

Source: Portfolio Visualizer

Interestingly, over this specific period, YGOG actually outperformed on a raw total-return basis. The Purpose ETF compounded at an annualized 58.50%, compared to 55.94% for Alphabet shares themselves and 52.32% for the Alphabet CDR. 

Importantly, those returns already factor in YGOG’s 1.71% MER, though they do not account for personal taxes investors may owe on the ETF’s distributions in a taxable account. To be fair, a significant portion of those distributions has historically been classified as return of capital, which is relatively tax-efficient.

Still, raw return numbers only tell part of the story. The 1.25x leverage clearly increased volatility. YGOG experienced an annualized standard deviation of 34.71%, versus 32.02% for Alphabet shares and 31.58% for the CDR. Maximum drawdowns were also worse. At its deepest decline during the test period, YGOG fell 27.73% peak-to-trough, compared to 24.11% for Alphabet itself and 24.25% for the CDR.

This is where I think more discerning investors should focus their attention: risk-adjusted returns. Using the Sharpe ratio, which measures how much return an investment generated relative to the volatility it experienced, simply buying and holding Alphabet shares actually came out ahead. Alphabet itself posted a Sharpe ratio of 1.42. YGOG lagged slightly at 1.38, while the CDR came in lowest at 1.35.

Double-checking with another example

Of course, YGOG could be an outlier. Another older entrant in this category worth looking at is the Purpose Apple Yield Shares ETF (APLY) built around Apple.

The structure here is very similar to YGOG. APLY uses 1.25x leverage on Apple shares while systematically selling covered calls on up to 50% of the portfolio. The ETF currently carries a management expense ratio of 1.74% and, as of May 2026, advertised a 6.07% distribution yield.

This time, though, the results were more mixed. Unlike the Alphabet example, where the leveraged covered-call structure slightly pulled ahead on raw returns, the Apple version underperformed buying and holding the underlying stock outright from January 2023 through April 2026

Source: Portfolio Visualizer

And once again, the additional leverage came with higher volatility and deeper drawdowns. APLY experienced higher annualized standard deviation and a worse maximum peak-to-trough decline than simply holding Apple shares directly. More importantly, APLY also produced the weakest risk-adjusted returns of the three options as measured by Sharpe ratio.

For both YGOG and APLY, the ETF’s managers have discretion regarding how aggressively to overwrite the portfolio with covered calls, which strike prices to choose, how far out expiries should be, and how much upside they are willing to sacrifice in exchange for premium income. 

Small changes in those decisions can materially alter outcomes, especially over shorter periods where a handful of strong or weak months can skew results significantly. This may explain why YGOG did better than APLY relative to its underlying stock and CDR.

Now, to be fair, these products are still relatively young. I may revisit this comparison again in a few years once more data becomes available from Harvest ETFs and Ninepoint Partners. But based on the evidence available so far, I would describe the results as mixed at best, at least for parts of the Purpose lineup.

Single-stock ETFs are a solution in search of a problem

To be clear, I am not categorically against leverage or covered calls in ETFs. There are circumstances where both tools can be used thoughtfully, but single-stock ETFs fail the sniff test for me. They feel like a case where investors are paying more for less.

Today, you can buy exposure to the largest U.S. companies through a S&P 500 ETF for a 0.09% MER, or about $9 annually per $10,000 invested. In contrast, these single-stock, covered-call ETFs routinely charge north of 1.5% just to own one company, apply leverage, and sell options on your behalf. And based on the examples we just looked at, investors are often ending up with worse risk-adjusted returns, and in some cases worse outright total returns, than simply buying and holding the stock itself. 

Now, I know the classic counterargument here is that “this is what retail investors want.” But I think that is largely the ETF industry’s version of the Nuremberg defense. Investor demand alone does not make something a good product. Ben Felix at PWL Capital even called these “ETF Slop” in a YouTube video.

There is a concept in economics called rent-seeking. This refers to extracting value through fees, structures, or financial engineering without necessarily creating proportional economic value for the end investor. I think some of these single-stock ETFs fit that description fairly well. 

Another common defense of these ETFs is that they are “income focused.” But total return is what ultimately matters. There is no meaningful mathematical difference between your selling shares yourself to generate cash flow versus an ETF manager selling upside through covered calls, paying out a distribution, and having the ETF’s NAV fall accordingly.

A lot of investors struggle with this because of what behavioural finance calls the mental accounting fallacy. People often mistakenly treat distributions as “income” while treating capital appreciation as “principal,” even though both are simply components of total return.

Is it ever a good idea to buy single-stock ETFs?

Another argument I hear is that some investors want to run covered-call strategies on blue-chip stocks like Microsoft but do not have enough capital to buy 100 shares themselves. 

But I think if buying 100 shares of a stock is financially unrealistic for your portfolio size, perhaps a leveraged covered-call strategy concentrated in a single stock is simply not an appropriate strategy in the first place. Selling covered calls on 100 shares of Microsoft requires over US$41,000 in capital. For most investors, that should probably represent only a small portion of an already diversified portfolio.

Instead, what often happens is investors buy these ETFs, receive monthly distributions, and then simply reinvest them back into the same ETF. In practice, they are paying a manager high fees to systematically carve pieces off their own investment, hand them back as cash distributions, and then buy back in.

Some of the advertised yields should also make investors pause. For example, Harvest’s version of an Coinbase covered call ETF has a 48.09% headline yield. Investors need to ask whether that level of payout is actually sustainable, or whether a meaningful portion of it is simply coming from sacrificing future upside and returning capital back to investors in a more psychologically appealing format.

The other thing worth mentioning is just how speculative some of the underlying names for these single stock ETFs can be. Providers now offer leveraged, covered-call ETFs tied to volatile stocks like Palantir Technologies, Tesla, Strategy, and Circle Internet Group. 

That is a lot of uncompensated risk stacked together: single-stock concentration risk, leverage risk, covered-call upside reduction, active management risk, and fee drag, all wrapped into one structure. For that reason, I am out on single-stock yield ETFs.

Read more about ETF investing:

• The MoneySense ETF Screener

• How to get back into emerging markets using ETFs
• Do you need market-neutral ETFs in your portfolio?
• Best ETFs in Canada for 2026

About Tony Dong, MSc, CETF

Tony Dong has been published on USA Today, U.S. News & World Report, TheStreet and more. He is also the lead ETF analyst for ETF Central, and he holds The ETF Institute’s Certified ETF Advisor designation.

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