The "Burn Rate" Explained
We define Burn Rate as the portion of the dividend that was funded by destroying the fund's NAV (Net Asset Value).
If the Burn Rate is positive, the fund is effectively returning your own money to you. This is not "income." It is a partial liquidation of your account.
The "Toxic" Tier (YieldMax & Friends)
Look at TSLY in the scorecard above. With a yield often exceeding 60%, it seems like a miracle. But the Total Return is barely positive (or negative). This means almost the entire distribution is coming from NAV erosion.
The Danger: If you spend that 60% yield, your principal balance drops by ~45% in a year. Do this for two years, and you have half your money left.
The "Healthy" Tier (Cornerstone)
Compare this to JEPI or SPYI. Their yields are lower (7-12%), but their Total Returns match or exceed their yields.
The Result: You can spend the entire dividend and still have your original $10,000 intact (or growing). This is what sustainable income looks like.
The "Reverse Split" Trick
How do funds like TSLY stay alive if they drop 50% a year? Reverse Splits.
When the share price drops below $10, the fund manager merges shares (e.g., 1-for-2 split). Your 100 shares at $9 become 50 shares at $18.
- The Illusion: The price chart looks like it "reset."
- The Reality: You now own half as many shares. Your income potential has been permanently cut in half unless you buy more.