BITO vs. MSTY: Which ETF Is the Best Dividend Play?

DORIAN TRADER

BITO vs. MSTY: Which ETF Is the Best Dividend Play?

When it comes to high-yield ETFs, the discussions is ofter around BITO vs. MSTY: BITO is the first Bitcoin ETF, and MSTY is the YieldMax MSTR Option Income Strategy ETF. Previously, we wrote about BITO in this blog post, where we argued that it is one of the best dividend plays in the stock market—especially when combined with the right options strategy that we teach at Dorian Trader. We also created a video on the topic, which sparked some debate, as many believe MSTY is actually the superior dividend play.

In this post, we will compare BITO and MSTY, analyzing their respective strengths and weaknesses before providing our opinion on which ETF offers the best dividend opportunities.

Understanding MSTY: YieldMax MSTR Option Income Strategy ETF

The YieldMax MSTR Option Income Strategy ETF (MSTY) is an actively managed fund designed to generate monthly income through covered call strategies on MicroStrategy Incorporated (MSTR). MSTY focuses on capturing compelling yields while maintaining limited participation in MSTR’s price appreciation.

MSTY’s Investment Objectives:

Primary Objective: Generate consistent current income.
Secondary Objective: Provide exposure to MSTR’s share price while capping potential investment gains.

Given that MicroStrategy is heavily involved in Bitcoin holdings, MSTY’s performance is indirectly influenced by Bitcoin’s price movements, albeit with a different risk-reward structure compared to direct Bitcoin ETFs.

BITO vs. MSTY: A Head-to-Head Comparison

To determine which ETF provides a better dividend opportunity, we’ll compare BITO and MSTY across several key metrics.

1. Dividend Yield

BITO: Currently offers an annual dividend yield of 50% based on the last payout.
MSTY: Boasts a significantly higher annual dividend yield of 95%.
Winner: MSTY takes this round with a substantially higher yield.

2. Monthly Dividend Payouts

BITO: Averages around $1.15 per share per month over the past 12 months.
MSTY: Averages about $2.88 per share per month.
Winner: MSTY again outperforms BITO in this category.

3. Dividend Stability & Risk Exposure

BITO: Derives its dividends primarily from Bitcoin futures contracts. While it does employ swaps and short-term Treasuries, the dividend’s stability is directly tied to Bitcoin’s performance. A falling Bitcoin price could negatively impact BITO’s payouts.
MSTY: Generates income through selling covered calls on MSTR. Since MSTR’s performance is also influenced by Bitcoin, MSTY is still somewhat exposed to Bitcoin price swings. However, due to its income strategy, it can still produce dividends even in bearish Bitcoin markets.
Winner: MSTY has a slight edge here, as covered call strategies tend to provide more stability in dividend payouts.

4. Options Liquidity & Trading Strategies

BITO: Features good options liquidity, making it viable for a range of options strategies that can enhance returns or protect capital.
MSTY: Has poor options liquidity, limiting its usefulness for active traders looking to hedge or optimize returns through options.
Winner: BITO wins this category, as better options liquidity allows for greater flexibility in trading strategies.

Our Verdict: Which ETF Is the Better Dividend Play?

While MSTY offers a higher dividend yield and larger payouts, BITO’s superior options liquidity makes it a more attractive choice for traders who want to implement strategies that protect principal capital. Since protecting capital is the most critical aspect of long-term investing, we prefer BITO over MSTY despite MSTY’s higher dividend potential.

However, if your sole focus is maximizing yield and you’re comfortable with its risks, MSTY might be the better choice.

Ultimately, when it comes to BITO vs. MSTY as it regards to best ETF, it depends on your investment goals:

If you want higher monthly income, MSTY is the better option.
If you value flexibility and capital protection, BITO is the smarter play.

Both ETFs have their advantages, and the choice between BITO and MSTY comes down to risk tolerance and investment strategy. Do you prioritize high yields, or do you want the ability to use options strategies to enhance returns while managing risk?

Let us know your thoughts in the comments! Also, be sure to check out our detailed blog post on BITO and our video breakdown to learn more about our perspective on dividend-paying ETFs.

DORIAN TRADER