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For Your Education and Enjoyment Replace Your Fixed Income With This Dividend ETFWritten by Jordan Chussler. Published 9/24/2025. 
Key Points - With the Federal Reserve slashing its benchmark interest rate for the first time since 2024, yields on fixed income are heading lower.
- For income-focused investors, dividend ETFs can help offset losses from less productive debt securities like Treasury bills and CDs.
- Because these funds often use options strategies to produce higher yields, it is important to be aware of the tax treatment for their dividends.
On Sept. 17, the Federal Reserve delivered its first cut to the effective federal funds rate (EFFR) since 2024—just what Wall Street had been waiting for. The market responded positively, rising 1.42% in the days following the announcement. Yet many income investors, who have enjoyed above-average yields on fixed-income products since the pandemic began, are finding debt securities less attractive. If the Fed continues trimming rates through year-end—as it did from September to December last year—equities may become the go-to for those aiming to recoup lost yield. Gold just surged past $3,600, but Weiss Ratings expert Sean Brodrick says the real upside is in select gold stocks — in past bull markets, these plays delivered gains as high as 5,000% to 9,800%, and Sean has now identified five companies he believes could see explosive moves in the early stages of what may be the biggest gold rally yet. Click here to see Sean's five top gold picks Of course, with market uncertainty still high and inflation creeping back toward the Fed's 2% target, another rate cut at next month's FOMC meeting is far from guaranteed. However, the CME Group's FedWatch Tool currently assigns nearly a 90% probability to a September cut. If you're searching for higher income, one ETF worth considering is the NEOS S&P 500 High Income ETF (BATS: SPYI). SPYI's Eye-Catching Monthly Dividend Gone are the days of ultra-high yields on near-risk-free investments. In May 2022, Series I savings bonds paid 9.62%; today they yield 3.98% (and likely will drop again after Oct. 31). Even one-year municipal bonds, at roughly 2.06%, now look more appealing by comparison. The actively managed SPYI, with a 0.68% expense ratio, seeks "high monthly income in a tax-efficient manner with the potential for upside appreciation in rising markets." It currently yields 11.67%—about $6.15 per share annually—paid out in monthly installments. NEOS implements this via an S&P 500 index fund strategy that combines covered calls with purchased out-of-the-money options. By buying those extra calls, SPYI's managers capture more upside when equities rally—unlike some peers, such as the JPMorgan Equity Premium Income ETF (NYSEARCA: JEPI), which typically sells near-the-money calls and thus caps its appreciation potential. Since its launch on Aug. 30, 2022, SPYI has returned 8.46% while paying an average annual yield between 10% and 11%. From its April 4 low, the fund has climbed nearly 23%. A Deep, Growth-Focused Portfolio SPYI's top-10 holdings mirror the broader S&P 500, emphasizing sectors like technology, consumer discretionary, and communication services. Companies such as NVIDIA (NVDA), Amazon (AMZN), and Meta Platforms (META) account for three of its top five allocations. By industry, SPYI is weighted approximately 27% in semiconductors, 22% in software, 17% in media, and 16% in specialty retail. With over 500 holdings versus JEPI's roughly 125, SPYI offers broader company exposure alongside its diversified covered-call approach. Understanding SPYI's Tax Treatment High-yield ETFs often distribute returns of capital (ROC), taxed as ordinary income—potentially up to a 37% marginal rate. SPYI, however, benefits from Section 1256 of the U.S. tax code. Its gains receive a 60/40 split: 60% taxed at the lower long-term capital gains rate and 40% at ordinary income rates. In contrast, most of JEPI's distributions are treated entirely as ordinary income, giving SPYI an edge for tax-conscious investors.
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