r/YieldCanary

If you've ever seen YieldCanary display three different yield numbers on the same income ETF and had no idea which one to trust -- this post is for you. There are three distinct yield metrics floating around in the income ETF space and they can look wildly different from each other on the same fund.

Metric 1 -- Advertised Yield (what the issuer shows on their website)

This is the number on the fund's official website. It takes the most recent monthly distribution, annualizes it (multiplies by 12), and divides by the current share price.

The problem: it's a snapshot of one month. If distributions are shrinking -- which they often are in Severe Risk funds -- the advertised yield is overstating what you'll actually receive going forward. It assumes last month repeats forever which it won't.

Metric 2 -- Headline Yield (TTM -- Trailing Twelve Months)

This takes every distribution paid over the last 12 months, adds them up, and divides by the current share price. It's a more complete picture than the advertised yield because it reflects a full year of actual distributions not just last month.

YieldCanary shows this as the Headline Yield on each fund's Deep Dive page and on the main Dashboard.

The problem: it still doesn't tell you where the income is coming from. A fund can have a 51% TTM yield while paying most of it from your own principal. The number looks great. The reality is very different.

Metric 3 -- True Income Yield (what YieldCanary shows)

This is the number that actually matters.

True Income Yield strips out the Return of Capital portion we calculate from the headline yield -- leaving only what the fund is genuinely earning as real income.

The simplified way to think about it:

Headline Yield × (1 - Effective ROC%) ≈ True Income Yield

YieldCanary calculates this from actual distribution data and weighted ROC history over 12 months.

What is Effective ROC?

This is worth explaining because YieldCanary shows two different ROC numbers and they can look very different from each other.

ROC% (current month) -- what percentage of last month's distribution was classified as return of capital. This changes every month and can swing dramatically.

Effective ROC -- the weighted average ROC across the last 12 months of distributions. This is the smoothed picture of how much of the fund's income has historically been real earned income vs capital being returned. YieldCanary uses Effective ROC in the True Income Yield calculation because a single month's ROC can be misleading -- a fund might have an unusually high or low ROC month that doesn't reflect its typical pattern.

So if a fund has a 51% headline yield and 85% Effective ROC:
51% × (1 - 0.85) ≈ 7.65% True Income Yield

That's the real number. Not 51%, 7.65%.

Why Return of Capital matters:

When a fund pays you via Return of Capital it isn't distributing earned income -- it's returning a portion of your original investment and calling it a distribution. Your cost basis decreases. The NAV quietly erodes. Eventually the fund has less capital to generate income from, the distribution shrinks, and you're left holding a fund worth significantly less than when you bought it.

That's the yield trap. The advertised yield and headline yield look great. The True Income Yield tells the real story.

A real example -- TSLY vs SPYI (live data from YieldCanary as of today):

TSLY (YieldMax Tesla):
Advertised yield: 51.38%
ROC this month: 93.85%
Effective ROC (12-month weighted): 85.43%
True Income Yield: 6.84%
Death Clock: 0.59 years
Canary Status: Severe Risk

SPYI (NEOS S&P 500):
Advertised yield: 11.74%
ROC this month: 79.39%
True Income Yield: 11.68%
Death Clock: N/A -- Tax-Efficient ROC badge
Canary Status: Healthy

TSLY advertises a 51% yield. The True Income Yield is 6.84%. The rest is return of capital -- your own money being handed back to you while the NAV quietly declines.

SPYI has 79% ROC this month but its True Income Yield is 11.68% -- nearly matching the advertised yield. How?

SPYI's high ROC is a structured outcome of their confirmed Section 1256 options strategy -- not NAV erosion. For funds like SPYI that use confirmed Section 1256 contracts the IRS classifies those options premiums as Return of Capital for tax purposes even though the fund is genuinely earning income. The NAV has held up. The price has been positive. That's what the Tax-Efficient ROC badge on YieldCanary signals -- the ROC is a feature not a bug.

Funds that have the Tax-Efficient ROC badge will always have their Headline Yield = True Income Yield since there is no NAV erosion to speak of.

TSLY's ROC is completely different. The NAV has been declining. The distribution has been shrinking. The fund is running out of road.

Both have high ROC, but completely different situations. True Income Yield and the Death Clock together separate them.

How to use all three on YieldCanary:

The main Dashboard shows Advertised Yield, TTM Headline Yield, and True Income Yield. Look at all three together:

If Advertised Yield is much higher than TTM Yield -- distributions are shrinking. Recent months are paying more than the full year average. Red flag.

If Headline (TTM) Yield is much higher than True Income Yield -- most of what you're receiving is your own principal coming back not real earned income. The gap is the yield trap.

If True Income Yield is close to Headline Yield -- the fund is generating most of its distributions as real income. That's what you want.

The gap between advertised and true yield is the number that tells you the most. Check it on every fund you're considering.

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Let me know your thoughts in the comments!