‘A Good Bet,’ Says Top Investor as GPIQ ETF’s 9.7% Dividend Yield Stands Out

There are a variety of different investment goals one can possess, depending on time horizons, risk profiles, and overall financial standing. While young investors might be willing to pursue riskier, growth-driven strategies, those closer to retirement may prefer a more income-focused approach.

In some ways, the Goldman Sachs Nasdaq 100 Core Premium Income ETF (GPIQ) seeks to provide both. At its core, as the name suggests, the ETF seeks to harness the dynamism of the large-cap stocks found on the Nasdaq 100 index. Not surprisingly, its top seven holdings are the “Magnificent 7” tech firms, with Nvidia alone comprising about 9% of its portfolio.

But GPIQ isn’t just about riding the upside. It adds a layer of income generation through an actively managed covered call strategy. In simple terms, the fund collects premiums by selling options on stocks it already owns. If those stocks rally past a certain level, some upside is capped – that’s the trade-off. Yet, in more muted or choppy markets, those option premiums can act as a cushion, helping to deliver a more consistent income stream.

While the ETF is still relatively new, having launched in October 2023, its near-10% yield stands out. For investors looking to stay connected to equity growth while adding a consistent income component, GPIQ offers a structure that aims to deliver a bit of both without leaning too heavily in either direction.

One investor, known by the pseudonym SiliconBytes Insights, points out that GPIQ is exposed to a high-growth equity portfolio and maintains a high degree of equity participation. But while Nasdaq 100-focused portfolios tend to have low dividend yields in the neighborhood of 1%, GPIQ has successfully used options premiums to approach a yield in the double digits.

The investor believes that the strategy “is a good bet going into the earnings season because macro uncertainties may push implied volatility higher for Nasdaq options.”

While SiliconBytes acknowledges the ETF hasn’t had the opportunity to develop much of a track record just yet, the investor appreciates the setup and thinks further gains are to be found up ahead.

“The fund’s structure supports both yield and NAV growth,” sums up SiliconBytes, rating GPIQ a Buy. (To watch SiliconBytes Insights’ 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.