Dividend Distributions in S&P 500 High Income ETF (ISPY)
Does ISPY distribute dividends?
What is the source of ISPY’s dividend distributions?
ISPY invests in financial instruments that, in combination, should track the performance of the Index. The Fund will invest in financial instruments, such as equity securities, swap agreements, futures contracts and U.S. Treasury securities, that generate taxable income in the form of interest, dividends and capital gains (or losses). However, a significant portion of the monthly distributions may be characterized as a return of capital for financial reporting purposes.
How is the amount of ISPY’s dividend distributions determined?
ISPY intends to make distributions each month of an amount that generally reflects the dividend and call premium income earned by the Index (net of Fund expenses) as measured by the S&P 500 Daily Covered Call Index – Income Only, a sub-index that measures the cash received by the Index from dividends and call premiums. The monthly distributions are intended to provide shareholders with dividend and call premium income.
How are ISPY’s dividend distributions taxed?
Generally, ISPY’s monthly distributions will be taxed as ordinary dividends, but not qualified dividends. However, a significant portion of the Fund’s distributions may be treated as return of capital for tax purposes. In general, distributions that are treated as return of capital are not taxable and will be reported as non-dividend distributions on Form 1099-DIV.
If you have questions about the tax implications of your investment in a Fund, you should consider consulting a tax professional.
Where can I find additional information about dividend distributions?
The distribution schedule, which includes ex-dates, record dates and payable dates, can be found here: Distribution Schedule. Dividend rates are posted after market close the evening prior to ex-date on each Fund’s product page. For Form 1099-DIV purposes, the character of each dividend can be viewed on the ICI Primary Report posted in the Tax Supplement section here: Tax Supplements.
The Fund seeks to replicate a daily covered call strategy by investing in equity securities and derivatives. The Fund does not sell (write) call options.
Holdings are subject to change. ProShares may invest in financial instruments (including derivatives) that, in combination, should have daily price return characteristics similar to the fund's benchmark.
Registered Investment Companies are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually. For specific tax advice, we recommend you speak with a qualified tax professional.
Investing involves risk, including the possible loss of principal. This ProShares ETF is non-diversified and entails certain risks, including risks associated with the use of derivatives (swap agreements, futures contracts and similar instruments), imperfect benchmark correlation and market price variance, all of which can increase volatility and decrease performance. Please see summary and full prospectuses for a more complete description of risks.
There is no guarantee any ProShares ETF will achieve its investment objective. The performance of the Fund may not correspond to the performance of the S&P 500 Index, and the Fund may not be successful in generating income for investors.
The S&P 500 Daily Covered Call Index replicates the performance of a covered call investment strategy that combines a long position in the S&P 500 Index with a short position in S&P 500 Index call options. In particular, the index is designed to replicate a daily covered call strategy that sells call options with one day to expiration each day. The Fund intends to make distributions each month of an amount that reflects the dividends and call premium income earned by a daily S&P 500 Index covered call strategy (net of expenses). There can be no guarantee that the Fund will make such distributions and the amount of such distributions, if any, may vary significantly from month to month. A significant portion of such distributions may be characterized as a return of capital.
Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. There is no guarantee that capital gain distributions will not be made in the future. There is no guarantee that dividends or interest income will be paid. Your brokerage commissions will reduce returns.
Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.
The S&P 500 Daily Covered Call Index is a product of S&P Dow Jones Indices LLC and its affiliates and has been licensed for use by ProShares. "S&P®" is a registered trademark of Standard & Poor's Financial Services LLC ("S&P") and "Dow Jones®" is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones") and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates. ProShares have not been passed on by S&P Dow Jones Indices LLC and its affiliates as to their legality or suitability. ProShares based on the S&P 500 Daily Covered Call Index are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates, and they make no representation regarding the advisability of investing in ProShares. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.