The 5% Yield Is Tempting But You Should Know Something Before Buying

"KMLM doesn't generate income like traditional dividend ETFs. It tracks the KFA Mount Lucas Index through a trend-following managed futures strategy investing in 22 futures contracts across commodities, currencies, and global fixed income markets. Distributions represent trading gains from futures positions, not dividend payments from stocks. When the strategy captures price trends, it generates profits distributed to shareholders. When trends reverse or markets remain range-bound, distributions plummet."

"The fund's dividend history reveals extreme instability that undermines its appeal as an income investment. Last December's distribution surged compared to the prior year, yet remained far below the 2022 peak when commodity trends were exceptionally strong. This volatility stems from the fund's reliance on capturing price trends in futures markets. When trends reverse, distributions collapse."

"The 5% yield headline masks disappointing performance when examining total returns. Over the past year, KMLM delivered just 2.5% when combining dividends with price changes. This weak performance stems from the fund's reliance on capturing futures market trends, which failed to materialize consistently. The result: distributions barely compensated for capital losses as the strategy struggled in range-bound markets."

KMLM offers a 5% dividend yield based on its most recent annual distribution. The fund follows a trend-following managed futures strategy tracking the KFA Mount Lucas Index across 22 futures contracts in commodities, currencies, and global fixed income. Distributions derive from trading gains on futures positions rather than equity dividends, so payouts depend on captured price trends. Historical distributions show extreme instability, with spikes during strong commodity trends and collapses when trends reverse or markets are range-bound. Over the past year, total return was about 2.5% as distributions barely offset capital losses, underperforming the S&P 500 by a wide margin.

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