My #1 Dividend Pick (13% Yield)

Sporting a 13% dividend yield, JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) gets a lot of attention from income-focused investors, and rightly so:

Overview

JEPQ is a covered call ETF. This means the fund generates income to pay dividends by selling call options against the fund’s portfolio of stocks. JEPQ is a very new ETF, which launched in May 2022. The JP Morgan website explains that it:

• Generates income through a combination of selling options and investing in U.S. large-cap growth stocks, seeking to deliver a monthly income stream from associated option premiums and stock dividends
• Seeks to deliver a significant portion of the returns associated with the Nasdaq 100 Index with less volatility
• Constructs a long equity portfolio through a proprietary data science driven investment approach designed to drive portfolio allocations while maximizing risk-adjusted expected returns

The JEPQ portfolio primarily covers the largest tech stocks on the Nasdaq 100 stock index. Here are the fund’s top 10 holdings.

Information technology is the top sector at 39.6%. Communication services and consumer discretionary are the next two sectors at 12.9% and 11.9%, respectively.

Options sold are one-month, out-of-the-money call options. The strategy generates attractive income and gives us a portion of the potential upside share price gains.

Investment Considerations

Through the 2022 down market, JEPQ’s sister fund, the JPMorgan Equity Premium Income ETF (JEPI), has been the best performing of the three covered call ETFs in the Dividend Hunter portfolio. Writing out-of-the-money calls versus the at-the-money calls of QYLD will let JEPQ capture more of the gains once the stock market turns positive.

JEPQ has paid 11 monthly dividends to date. They vary from month to month, at around 55 cents per share. Using the latest payments, that puts the yield at about 13%.