F/m High Yield 100 ETF (ZTOP)

The F/m High Yield 100 ETF trades under ZTOP. It is a simple idea: find the 100 U.S. stocks with the highest dividend yields, buy them equally, and hold them. You get a concentrated basket of the most income-rich stocks in the market. You also get volatility, concentration risk, and no guarantee that these companies will keep paying what they pay today.

How ZTOP works in plain terms

Every quarter, the fund looks at all U.S. stocks and ranks them by dividend yield — the annual dividend per share divided by the stock price. It then holds the top 100 yielders, weighted equally (meaning each stock gets roughly the same dollar amount of the fund’s assets, regardless of its market capitalisation). Rebalancing happens once a quarter, so if a company’s stock price falls and its yield rises, it might take a bigger allocation; if it rises and yields fall, it shrinks.

The result is a fund that looks very different from the broad U.S. stock market. The fund skews heavily toward mature, low-growth businesses that prioritize paying dividends: utilities, real-estate investment trusts, energy companies, and high-yielding financials. You will not find many growth companies here because growth stocks typically reinvest profits rather than paying them out.

Why someone buys ZTOP

The core appeal is simple. If you want income from stocks and you do not want to spend time selecting individual names, you buy ZTOP. The 100-stock limit means it is not a watered-down index fund; it is a real, concentrated bet on “the income part of the market.” The equal weighting ensures that even a smaller company with an attractive yield gets a meaningful allocation, rather than being crowded out by the largest mega-cap dividend payers.

For retirees or near-retirees who think “I want to live off dividends from my stock portfolio,” ZTOP provides a mechanical way to achieve that without hand-picking companies. The quarterly rebalancing is automatic; you do not have to monitor individual companies or worry about whether a dividend is about to get cut.

The real tradeoffs

There are two downsides to the simplicity. First, yield-based selection will sometimes buy stocks whose dividends are actually in trouble. A company cutting costs and slashing capital to support a high payout can look attractive on a yield screen but is heading for distress. ZTOP will own it, at least until the next rebalancing. The diversification into 100 names helps cushion any single blowup, but the fund will take losses when dividend-cutting happens.

Second, equal weighting can be expensive. Rebalancing back to equal weights quarterly means buying stocks that have fallen and selling those that have risen — the opposite of the “buy low, sell high” ideal. Over many years, this drag can add up, and it is not tax-efficient in taxable accounts. You are trading away some long-term capital appreciation for mechanical rebalancing discipline.

What to watch if you own ZTOP

The dividend yield of the fund — typically 5 to 8 per cent depending on market conditions — tells you the weighted average income rate of the holdings. A higher yield attracts income seekers but can signal that many stocks in the portfolio are seen as risky. A lower yield means the fund is holding more stable, expensive dividend payers.

Watch the composition by sector. If utilities and REITs make up 40 per cent of the fund and energy makes up another 20 per cent, you have a very specific economic bet: that interest rates will stay moderate (so utilities and REITs do not suffer), energy demand will hold steady, and no major sector rotation will crush these segments. A broad index fund does not have that risk.

Finally, note that dividends are not returns of capital; they are usually taxed as income in the year paid. If you own ZTOP in a taxable account, the quarterly distributions will create annual tax bills, even if you reinvest them. Using ZTOP in a tax-deferred account like an IRA can eliminate this friction.

Who should use ZTOP and who should not

ZTOP is for investors who genuinely want to live off dividends or who have a strong income need and are comfortable holding stocks to meet it. It is also for investors who believe the highest-yielding stocks are undervalued and will appreciate over time as their valuations normalise.

ZTOP is not for young accumulators saving for retirement 40 years away; they benefit from capital growth, not high current yield. It is not for investors who are uncomfortable with the concentrated bet on mature, low-growth sectors. And it is not for investors who need certainty in their income stream; dividend cuts happen, and ZTOP offers no protection.

The fund lives on the NASDAQ and trades like any stock, with tight bid-ask spreads given the strong liquidity. Before buying, check the fund’s fact sheet for the current yield and the top 10 holdings to confirm you are comfortable with the portfolio composition.