The Newest Income ETFs 'Target' Fixed Payouts of 12 to 20 Percent a Year. Here's How That Actually Works

A new wave of “target income” exchange-traded funds aims to deliver distribution levels of about 12% to 20% a year by focusing on targeted payouts rather than a fixed yield. Three examples highlighted are the Defiance S&P 500 Target 20 Income ETF (SPYT), the Defiance Large Cap Target Income ETF (BIGY), and the Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF (QDPL). Although the headline returns are similar, each fund builds income differently—typically combining equity exposure with options premiums, sometimes dividend futures, and return of capital. The funds often run covered-call strategies, selling calls to generate cash while capping upside during strong rallies.