Ep. 5: International Dividend Dogs Crush the S&P - NAV Stress Tests and Building a Million-Dollar Portfolio

I have to start today with a number that genuinely made me do a double take this morning.
Oh, yeah.
Yeah.
Because we spend so much time obsessing over the S&P 500, like the Mag Seven, the whole
US tech dominance narrative.
Right.
It's all anybody talks about.
Exactly.
Yeah.
But while everyone was watching the NASDAQ, something shifted.
There's this ETF called IDRG, the international sector dividend dogs, which is kind of terrible
name, honestly.
It really is.
Over the last 12 months, it didn't just beat the market.
It absolutely crushed it.
We're talking a 42.7% return.
It's a staggering number.
I mean, especially when you compare that to the S&P 500, which did what, like, 13%.
Yeah, about 13% in that same period.
When you see that gap, you realize we might be at a real inflection point here.
So that's the mission for this deep dog.
We need to answer a pretty big question for you guys listening.
Is the era of blind US dominance taking a pause?
Are we seeing a changing of the guard?
Right.
But we aren't stopping there.
Because if you're an income investor, you've probably seen those covered call ETFs promising,
I don't know, 50, 60, sometimes 100% yields.
Ah, the free money illusion.
Yes.
It's incredibly seductive.
It really is.
And usually if it looks too good to be true, it is.
So we have a stress test today that exposes which of those popular funds are actually sustainable
money printers.
And which ones are just slowly eating their own tail, eroding your principal while handing
you a check?
Exactly.
We're going to rank them winners and losers.
We'll also look at the Trump trade in bold stocks, specifically a minor that's up 45%
year to date, which is wild.
Yeah.
And we'll lay out a blueprint for building a $1 million retirement portfolio that actually
lasts.
Layer by layer.
Plus, we've got a close look at a reddit favorite, ARCC, and whether it's 10% yield is a trap.
It's a packed session for sure.
Yeah.
It's going to be a good one.
So let's jump right back to that 42% return on ID OG.
What is actually going on with international stocks right now?
Because for a decade, the advice has literally just been, don't bet against America.
It has.
And for a decade, you know, that was right.
But markets move in cycles.
And this is the rotation we've sort of been waiting for.
For years, the US led because of growth, specifically tech growth.
Yeah.
Valuations in the US got pretty stretched.
Very stretched.
Meanwhile, international markets have been priced for a disaster for a long time.
But look at the flow of money.
In 2025 alone, international equity funds took in $57 billion in net inflows.
$57 billion.
Yeah.
The smart money is moving.
And it's not just ID OG, right?
Because I saw the data on ACWX, the iShares MSCI ACWX USETF.
Right.
The broad international fund.
Yeah.
And returned almost 36%.
Correct.
And that's a really critical distinction to make ID OG is a specific strategy.
But ACWX is a massive $8.7 billion fund that just holds the broad market outside the US.
It's a good benchmark.
Exactly.
When a boring, broad index more than doubles the return of the S&P 500 over a year, it tells
you, this isn't a fluke.
It's a fundamental valuation reset.
So if your portfolio is 100% US stocks, which I know a lot of people listen probably
are.
Oh, absolutely.
You effectively missed the biggest rally of the last 12 months.
You did.
You completely missed the engine that is actually firing right now.
Okay.
Let's dig into the how of ID OG, though.
You mentioned it's a specific strategy.
How does the dividend dogs thing actually work?
Are they just buying the worst companies?
Not the worst.
No.
But the most beaten down.
It's a contrarian strategy at its core.
Okay.
G picks the five highest yielding stocks from 10 different sectors and develop markets outside
North America.
Got it.
And high yield often means the stock price is dropped.
Right.
So you're basically buying value.
Yeah.
But here is the secret sauce.
It equal weights them.
Why does the equal weighting matter so much?
Because most indices are market cap weighted.
If you buy a generic international fund, you might end up with a massive chunk of your money
in just one or two mega cap companies.
We're just completely overweight in one sector.
Exactly.
ID OG caps any single sector at 10%.
It mathematically forces you into diversification.
So you're getting exposure to things you probably wouldn't ever buy on your own if you were
just picking stocks.
Precisely.
You're getting real European value plays.
Like what?
We're talking about companies like Equinoir and Norway, or OMV in Austria.
Okay.
These are energy and industrial heavy weights that have just been undervalued for a long
time compared to their US peers.
The recent rebalance even shifted weight away from Japan and more toward Europe.
So it prevents you from accidentally being overexposed to one country or one bubble.
Right.
And in a year where the US tech sector has been volatile and somewhat flat, that heavy exposure
to industrial energy and financials in Europe is exactly what drove that 42% return.
Makes total sense.
All right.
Speaking of heavy weights and, well, Chinese things, let's pivot to a specific sector that is
absolutely on fire.
Gold.
Gold.
But not just the metal, gold miners.
The source material called this the ultimate Trump trade.
Yeah.
We're talking about angle, gold, a shanty, ticker symbol, a, you.
And to be clear for everyone listening, when the source calls it the Trump trade, we're
not taking political sides here.
We're just impartially reporting on the market mechanics, the analysts are looking at.
Exactly.
We're just looking at the policy landscape, tariffs, potential trade wars, geopolitical
tension.
Historically, these are things that drive a flight to safety.
Basically inflation fear.
Inflation and uncertainty, yeah.
And gold prices are hitting records because of it.
But here's the problem with physical gold.
It's a pet rock.
A pet rock.
It is.
It just sits in a vault.
It doesn't pay rent.
It doesn't pay dividends.
It just stares at you.
Which is why we are looking at the miner, A.U.
Right.
Buying the miner gives you leverage on the price of gold, plus it runs as an actual business.
And A.U. is up 45% year to date.
That is wild.
It's nearly quadrupled over 52 weeks.
It's been a rocket ship.
See usually when I see a chart that goes straight up like that, my instinct is just, it's too
late.
I missed it.
Is this a bubble?
That is a very healthy instinct to have.
But you have to look under the hood.
What makes this a buy for me isn't just the price action of the metal, it's the balance sheet
of the company.
Okay, break that down.
Well, a few years ago, angle gold Ashanti was drowning in debt.
They were really struggling.
And now?
They use this massive bull run in gold to clean house.
They ended 2025 with an adjusted net cash position of $879 million.
Wow.
From debt to almost a billion in cash.
Yeah.
They aren't just surviving high gold prices anymore.
They are printing cash.
They've gone from a distressed miner to an absolute cash fortress.
And because they're a functioning business, they actually pay a dividend.
About 3% currently.
They paid out $1.8 billion in dividends in 2025 alone.
So you get the hedge against the geopolitical chaos, but you also get paid to wait.
And you get quality.
70% of their production right now comes from tier one assets.
Which means what?
Exactly.
It means these are low cost, high quality minds with long lifespans.
If you believe the geopolitical tension is going to stick around for the next few years,
this is a very strong, fundamental hedge.
Okay.
So we have international dividends and gold miners as the growth engines.
Now let's talk about the intem engines, the covered call ETFs.
Yeah.
This is where we need to be very, very careful.
I feel like every time I open YouTube or Reddit, someone is showing off a monthly dividend
check from a fund yielding 50%, it's like the ultimate passive income dream.
Or right.
But we have some stress test data here from our sources that is honestly pretty damning
for some of these popular funds.
It is.
We really have to look at any of the erosion, net asset value erosion.
It is the silent killer of income portfolios.
Because if a fund is paying you a 50% yield, but the share price drops by 40%.
You haven't actually made any money.
You've literally just been paid back your own principle minus their management fees.
It's like taking money out of your left pocket, putting it in your right pocket and calling
it income.
Exactly.
So the metric we're looking at in this stress test is called the distribution coverage ratio.
Let's unpack that for the listeners.
What does that number actually tell us?
It's simple math, really.
Did the fund earn enough money from selling options and from the dividends of the underlying
stocks to actually pay you that massive yield?
Ideally, you want a number greater than 1.0.
Meaning the fund earned more than it paid out.
Right.
And if it's below 1.0.
Then they are overpaying.
They are taking capital from the fund's own assets to pay you your dividend.
That shrinks the fund.
And a smaller fund generates less income next month.
That sounds like a death spiral.
It is a death spiral.
Okay.
Let's name names.
We're going to pass the stress test with the good guys in this space.
The clear winner right now is GPIX.
The Goldman Sachs S&P 500 core premium income ETF.
Okay.
GPIX.
In 2024, it's coverage ratio was 2.47.
In 2025, it was 1.89.
Wow.
So they are earning nearly double what they pay out.
Yes.
And that means the NAV, the actual share price is stable or even growing.
You get the monthly income, but your principle is actually safe.
That's incredible.
And GPIQ, the NASDAQ version from Goldman, actually grew its NAV from $10,000 to $13,000
while paying out that monthly income.
See that is the holy grail right there, growth and income.
What about the really popular ones like SPYI?
I see that ticker everywhere online.
SQI is very solid.
It passed with flying colors.
It's from NEOS.
It has had positive coverage since its inception.
It's consistently hovering around 1.3 or 1.4.
It's a very safe, stable income generator.
Exactly.
Okay.
Now the scary part.
Who failed the stress test?
The biggest red flag in the data is QDTE.
QDTE.
It has the worst NAV erosion by far out of the ones we analyze.
And that's the one people love because the yield looks so incredibly high.
Right.
Because people just look at the size of the check.
They don't look at their account balance.
We looked at a new metric in the data called available income avoiding NAV erosion.
Which means basically how much of that dividend check can you actually spend without hurting
your future self?
With QDTE, you have to reinvest 57% of the dividend just to keep your principal flat.
Ouch.
So they pay you a dollar.
You have to give 57 cents back immediately if you want the account to survive long term.
Precisely.
Whereas with GPIX or SPYI, you can keep almost all of it because the fund is generating real
excess return to cover it.
This perfectly brings us to the power rankings of the landscape.
It sounds like for the S&P 500 options, GPIX and STYI are the undisputed kings.
They are.
And I'd add TSPY to that list.
It's consistently outperforming the zero-data exploration strategies like X-D-T-E.
What about the diversified funds?
Everyone used to talk about GPI.
JPY is losing its crown, honestly.
B-A-L-I, which is from BlackRock, is significantly beating it right now.
Oh, interesting.
And what about the crypto space?
I know they have high yields there, too.
Fortunately, GlobalX's BCCC is outperforming NEOS's BTCI.
That is surprising.
Considering GlobalX usually lags behind NEOS in these complex options strategies.
It is.
But the data is the data.
BCCC is delivering better total returns right now despite the crypto downturn.
So we know what to buy and what to avoid.
But how do we actually put all this together?
We have a blueprint here from the sources for a $1 million retirement portfolio.
And it uses a layer kick strategy.
I love a good food analogy.
Right.
Walk us through the layers of the cake.
Think of this as a pyramid of risk.
Layer one is your foundation.
This is where the absolute bulk of the money goes.
Like what?
Broad market indices.
VOO for the S&P 500.
QQQ for the NASDAQ.
So no options, no price decay.
Just pure boring market exposure.
Right.
You need this because inflation is the ultimate enemy of retirement.
You need real growth.
If you put your foundation in income funds that just trades sideways forever, you lose purchasing
power over 20 years.
Makes sense.
Layer two.
Layer two is the dividend growth engine.
These are funds like SCHD, VIG, or DGRO.
I want to zoom in on DGRO for a second.
The source material highlights this one specifically.
What makes DGRO so special compared to the others?
DGRO is fascinating because it's not chasing high yield at all.
It's chasing sustainability.
Oh, so?
It has strict rules.
It only buys companies with less than a 75% payout ratio, and they must have five plus
years of consistent dividend growth.
Oh.
So it filters out the companies that are stretching themselves too thin just to pay you?
Exactly.
It completely avoids the yield traps automatically.
It's a built-in quality filter.
Smart.
So layer one is market.
Layer two is dividend growth.
What's layer three?
Layer three is income.
This is where those high quality covered call ETS.
We just talked about go SPYI, GPIQ, maybe QDVO.
These give you that 8 to 12% yield to actually live on, but they trade sideways or grow slightly.
They are very tax-efficient.
And finally layer four.
The sprinkle.
The sprinkle on top.
This should be your smallest allocation by far.
This is where you put the ultra high yielders, the 40 or 50% yields like the yield max funds,
but you never ever let this become your foundation.
That is such a crucial warning because I think a lot of people flip the cake upside down.
They put all their money in the high yield stuff because they want to quit their job tomorrow.
Right.
And that's exactly how you end up with a portfolio that's worth half as much in five years.
You cannot build a solid retirement on funds like QDTE that erode your NAV.
Even aggressive income investors like the dark dividend profile we analyzed in the sources,
they split the portfolio this way.
He uses SHD for the reliability and treats yield max funds purely as risk capital.
It's essentially dampling money.
It is.
If it works, great.
You get a huge payout.
If it goes to zero, your retirement isn't ruined because your foundation is solid.
Okay.
So we've built the ETF cake.
Some people still want to pick individual stocks.
Always.
And there's one stock that seems to be in literally every income investor's portfolio right now,
ARCC.
Heirs capital, the giant of the BDC world, business development companies.
It yields 10%.
And in this market when something yields 10%, usually people scream that a cut is coming.
Is the dividend safe?
This is a classic battle between market fear and fundamental strength.
The market is pricing in a cut because if interest rates fall, BDCs usually make less money
on their loans.
Right.
Because they do floating rate loans mostly.
Exactly.
But we looked at a deep dive on this.
And there are three massive pillars protecting that ARCC dividend.
Hit me with the first one.
All over income, ARCC has a massive cushion of undistributed taxable income.
It's currently sitting at about $1.38 per share.
And their regular quarterly dividend is what, like, 48 cents?
48 cents.
So they literally have nearly three quarters worth of dividends just sitting in the bank
essentially, just in case earnings dip.
That is a massive safety net.
It is.
Even if they're underlying business hit a brick wall tomorrow, they could keep paying you
that same yield for nine months.
Okay.
That's comforting.
What's the second pillar?
They've moved heavily into non-sponsored originations, which is industry speak for
what?
Lending directly to companies without a private equity firm sitting in the middle, cutting
out the middle man.
Right.
It gives them way better pricing power and significantly better terms on the loans they
write.
And the third pillar, equity alpha, they aren't just lenders.
They often take equity stakes in the companies they lend to, like getting upside potential.
Huge upside.
In 2025, they made $470 million just from exiting those equity positions.
That boosts their capital based significantly.
So despite all the fear around interest rates dropping, that 10 percent yield actually looks
pretty robust.
It really does.
It's one of the few double-digit yields out there that lets me sleep at night.
Speaking of sleeping well, let's wrap up with some wisdom from the crowd.
We look at a massive reddit discussion on your dividends about what to buy right now.
I always love checking these threads because you see where real retail sentiment is, totally
outside of the Wall Street analyst bubbles.
Definitely.
The usual suspects were all there.
Ofer real-t income, main for Main Street capital.
But there were some really interesting picks in the energy sector.
Yes, the MLPs, master-limited partnerships, energy transfer, ticker ET and enterprise products
EPD.
Those are yielding what?
6-7%.
Around there.
Yeah.
They are absolute cash flow monsters.
But the best part of that reddit thread wasn't even the tickers, it was a math lesson.
The concept of effective yield versus current yield.
Oh, this is the single most important concept for a long-term investor to grasp.
If you understand this, you win the game.
If you don't, you fall for the traps every time.
Break it down using the SEHE example they gave in the thread.
Sure.
So if you look at SEHE today on your brokerage app, the screen says it yielded about 3.5%.
Which a lot of people say is too low they want 10% right now.
Right.
But if you bought SEHE 10 years ago, your effective yield, which is the cash you get today divided
by the cash you put in 10 years ago, is about 8.3%.
Because they kept raising the dividend payout every single year.
Exactly.
Plus, you have capital appreciation on top of that.
Your initial $10,000 probably doubled or tripled in actual value, compare that to buying a yield
trap that pays 10% flat forever.
Because inflation eats that flat 10%.
Ten years later, your $10,000 buys a lot less than it used to.
Exactly.
Chasing a flat 10% can mathematically be worse than buying a growing 3% yield.
It just requires patience.
And honestly, that's the hardest thing in investing.
That is the ultimate yield trap lesson right there.
It is.
You really have to ask yourself, do I want to feel rich today or do I want to actually
be rich in 10 years?
So let's summarize the mission for today.
What are the key actionable takeaways for everyone's portfolio?
First, look abroad.
The US market is stalling out a bit.
But international dividend dogs, IDOG and broad markets like ACWX are breaking out.
Don't ignore that 42% return we talked about.
Diversification is your best friend right now.
Be completely ruthless with your covered call ETS.
Run the stress test.
If the distribution coverage ratio is below 1.0 like we saw in QDTE, stay away.
Or at least keep the position tiny.
Get to the winners like GPIX and SPYI that actually preserve your any of these.
And for the portfolio construction itself.
Build the layer cake, foundation first, broad markets, then your dividend growth engines
like DGRO.
Use the income funds as the third layer, not the first.
And keep the sprinkles those high risk yield max funds to an absolute minimum.
And finally, don't be afraid of ARCC's 10% yield because it's got a massive buffer.
It'll be very wary of flat yields that never grow.
Exactly.
This leaves us with a final thought for you to chew on today.
We talked about the psychological challenge of the yield trap.
It's so easy to look at a spreadsheet and logically say, sure, I'll take the 3% grower.
Right.
But when you're staring at a monthly bill, that 50% annualized yield looks incredibly tempting.
So the question for you is, are you investing for the income you need today or the income
you'll need forever?
Because those are often two very different portfolios.
That's the million dollar question.
Literally.
Thanks for joining us on this deep dive today.
Check your distribution coverage ratios, take a look at those international funds, and we
will see you next time.
Happy investing.