This ETF Delivers the Buffett Playbook With a 15% Yield. But Here's the Trade-Off.
Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) doesn’t pay a dividend, and new CEO Greg Abel isn’t changing that. In his first shareholder letter, Greg Abel wrote that Berkshire won’t pay one as long as each retained dollar is likely to create more than a dollar of market value for shareholders. It’s the strategy that Warren Buffett employed when he was CEO.
So how does an exchange-traded fund (ETF) built on Berkshire’s portfolio offer a 15% distribution yield? The VistaShares Target 15 Berkshire Select Income ETF (NYSEMKT: OMAH) does it with an options strategy. But it’s not a “free” 15% yield. There’s a trade-off that investors need to understand before committing a single dollar.
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The 15% yield doesn’t come from dividends
The VistaShares Target 15 Berkshire Select Income ETF achieves its target 15% distribution rate by selling call options on Berkshire Hathaway and other fund holdings, including Apple, American Express, Chevron, and Coca-Cola. These are the stocks that Buffett bought and held for years within the Berkshire portfolio.
The 15% yield comes mostly from the options premiums on the call options sold. Because it’s a target and not a guaranteed distribution rate, the fund aims to pay out roughly 1.25% every month. It’s a fairly typical covered-call strategy, similar to the ones used by funds like the Global X Nasdaq 100 Covered Call ETF (NASDAQ: QYLD).
It really is a Berkshire-style portfolio
As of Oct. 23, Apple (10.8%) was the VistaShares Target 15 Berkshire Select Income ETF’s largest holding, just ahead of Berkshire Hathaway itself (10.7%). American Express (6.5%), Kroger (5.3%), Chevron (5.2%), and Coca-Cola (5.1%) round out the top six positions.
Just like the Berkshire Hathaway portfolio itself, it’s a concentrated, large-cap mix with a defensive tilt. The 0.95% expense ratio is on the high side, but it’s not unusual for a covered-call ETF.
What you give up for the high yield
Selling call options caps your upside. In bull markets, covered-call ETFs often lag because the buyers of the options the fund sold exercise them to pick up shares at below-market prices.
In this fund’s case, a good benchmark for performance is Berkshire Hathaway itself. Since its March 2025 inception, the fund has returned approximately 15% versus a gain of around 9% for Berkshire Hathaway. The flat trading pattern for the stock is ideal for a covered-call ETF to outperform it, which is exactly what we’ve seen lately. It has, however, lagged the S&P 500‘s total return of roughly 34% over the same period.
That doesn’t make it a flawed fund. It’s simply one that has a trade-off investors must consider. High yield plus capped upside or full share price participation.
OMAH delivers for income seekers
The VistaShares Target 15 Berkshire Select Income ETF delivers the Buffett playbook, but not in the traditional sense. But this fund is a good choice for investors who want to combine that approach with a high yield.
If you want Berkshire Hathaway’s full upside, buy Berkshire Hathaway. If you want it with monthly income included and are willing to accept the trade-off to get it, OMAH is a well-built way to get it.
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American Express is an advertising partner of Motley Fool Money. David Dierking has positions in Apple. The Motley Fool has positions in and recommends American Express, Apple, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
This ETF Delivers the Buffett Playbook With a 15% Yield. But Here’s the Trade-Off. was originally published by The Motley Fool