11% Dividend Yield: Top Investor Says Load Up on This High-Yield ETF

It’s been an interesting couple of months, to put it mildly, with no shortage of developments on the international scene. The volatility around the globe has been reflected in the markets as well, prompting some investors to hedge their bets by looking for less risky opportunities.

ETFs are one avenue to decrease exposure to losses, as their performance is based on a basket of individual equities. That’s the common denominator uniting all ETFs, though there’s a world of difference between the various options available for investors.

The J.P. Morgan Nasdaq Equity Premium Income ETF (JEPQ) appeals to those keen on riding the wave of tech-inspired growth while enjoying monthly income distributions. The ETF is linked to the Nasdaq-100, sourcing its investments from among the largest companies listed on the Nasdaq stock exchange.

However, unlike other vehicles that base all their gains on the market’s performance, JEPQ offers another way for investors to increase their wealth. The ETF purchases equity-linked notes that essentially act as a covered call position on the Nasdaq-100 index. Thus far, this strategy has produced an average dividend yield of close to 11%, alongside an expense ratio of 0.35%.

One top investor, known by the pseudonym PropNotes, argues that the ETF effectively combines both income and appreciation.

“Getting in now with payouts at around 11% looks like a relatively attractive choice,” states the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.

Not surprisingly, PropNotes points out that the ETF’s prospects rely upon the long-term success of the Nasdaq-100. That said, it’s not an exact match with the Nasdaq-100, which has outperformed JEPQ in the almost four years it has been around.

However, by dealing with equity-linked notes, JEPQ has also been able to generate a stable income profile, making its historical performance “quite intriguing.” The investor explains that this effectively functions as a covered call strategy, while placing the onus on other financial institutions to worry about executing these short orders.

Moreover, even in a bear market, the investor doesn’t envision JEPQ delivering less than 6%-8%, arguing that this represents a “pretty good stress test.”

“I rate JEPQ a ‘Buy’ for income-focused investors seeking strong, relatively stable payouts as part of a diversified portfolio,” sums up PropNotes. “You get to have your cake and eat it too.” (To watch PropNotes’ track record, click here)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.