It’s been a volatile start to the year, with ongoing instability across global markets and the broader economic backdrop. With conditions still uncertain, investors looking for a measure of stability may turn to dividend ETFs.
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ETFs, by design, bundle a wide range of holdings into a single investment, helping to reduce exposure to swings in individual stocks. Dividend-focused ETFs add another layer, offering regular income alongside potential long-term growth.
The Amplify CWP Growth & Income ETF (QDVO) is one such option that fits that bill. The relatively young ETF – it was launched in August 2024 – leans heavily into large-cap equities with strong earnings and cash flow, while currently offering a distribution rate of 10.34%, paid on a monthly basis.
Though QDVO draws from a range of sectors, a closer look shows a clear tilt toward technology. The Magnificent 7 make up a significant share of its 43 holdings, with Nvidia (NVDA), Apple (AAPL), and Alphabet (GOOGL) alone accounting for nearly 30% of the portfolio by weight.
QDVO is actively managed (its expense ratio is 0.56%) and utilizes short-term covered call options to generate additional income. Though it’s down slightly year-to-date due to market-wide hiccups, as its total return (including distributions) exceeded than 30% during the past twelve months.
Top investor Steven Fiorillo calls QDVO a “big winner” for investors seeking double-digit returns.
“The way the portfolio is structured, QDVO is exposed to many companies that I feel are undervalued and that also have large premiums in the option market for the fund managers to take advantage of,” states the 5-star investor, who is among the very top 1% of stock pros covered by TipRanks.
Fiorillo is especially keen on QDVO’s current swath of investments, arguing that the current dip among the hyperscalers was “unwarranted.” The investor points out that the valuations for the big tech firms have been dropping despite earnings growth, making these companies “significantly undervalued” and setting QDVO up for a potential “breakout to the upside” in the year ahead.
The investor also appreciates QDVO’s strategy of opportunistically pursuing covered calls. He believes this feature helps further differentiate it from competing investment options.
“The aspect that I like is that QDVO isn’t bound to writing calls at all times, as it’s a tactical ETF that allows it to potentially outperform its peers from a capital appreciation standpoint,” adds Fiorillo.
He does caution that QDVO might not be the best fit for long-term investors, as it is unlikely to outperform an index fund in a bull market. That being said, for the time being, Fiorillo is clearly bullish on QDVO and its ability to deliver both income and appreciation.
So, no surprise here, Fiorillo is assigning QDVO a Strong Buy rating. (To watch Fiorillo’s track record, click here)
The Global X S&P 500 Covered Call ETF (XYLD) presents another option for those intrigued by the combination of exposure to big tech companies, regular income payments, and a covered call feature, with the fund currently offering a distribution rate of 11.70%, paid monthly.
XYLD has been around for over a decade and has made monthly distributions for twelve years running. Though the ETF has over 500 holdings, it also skews toward the Magnificent 7 companies, with NVDA and AAPL comprising its two largest investments, representing some 15% of its portfolio.
The ETF also has a relatively elevated expense ratio of 0.60%, making it somewhat expensive to hold. XYLD’s 1-year return (also taking distributions into account) is just shy of 19%.
Top investor Michael Del Monte has a positive take on the ETF’s potential to provide solid returns going forward as well.
“Theoretically, XYLD will outperform the Index during flat-to-down market environments given the direct equity exposure with the added covered call feature,” states the 5-star investor, who is among the top 3% of stock pros covered by TipRanks.
Similar to Fiorillo, Del Monte is bullish on the hyperscalers (at least over the long-term horizon). Where he differs, however, is in his expectations that investor sentiment will serve as a drag on their performance this year.
Therefore, Del Monte is expecting a relatively flat performance for the S&P 500 this year, while also predicting that investors will be shifting their focus on more value-oriented stocks. In that sense, XYLD offers a pathway to simultaneously remain invested in the S&P 500 and enjoy an “enhanced income component.”
Similar to Fiorillo’s critique of QDVO, Del Monte cautions that XYLD will likely underperform the S&P 500 during periods of rapid expansion. He just doesn’t believe that’s in the cards for the year ahead.
“I believe XYLD will outperform the S&P 500 Index for the time being, presenting investors with an appealing investment opportunity for equity and income exposure,” concludes Del Monte, while assigning XYLD a Buy rating. (To watch Del Monte’s track record, click here)
Disclaimer: The opinions expressed in this article are solely those of the featured investors. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.