Why I Was Right About the Best Monthly High-Yield Stock to Buy

Income Investing
by Tim Plaehn
Subscribe to all of Tim Plaehn’s free investing research

Last September, I recommended an investment swap to my Dividend Hunter subscribers. The two ETFs involved in the swap are very similar, but as of now, the change has worked out well for my subscribers.

Let me show you how you can get in on this monthly dividend winner today…

Stacks of coins on a table, with trees growing out of them

In July 2020, I added the Global X NASDAQ 100 Covered Call ETF (QYLD) to the Dividend Hunter recommended portfolio. The fund employs a covered call strategy with the Nasdaq 100 stock index as its underlying asset. QYLD pays monthly dividends, and the website reports a current distribution yield of 12.25%.

In May 2022, JP Morgan launched the similar JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). The website provides these goals for JEPQ:

  • 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.

JEPQ pays monthly dividends and reports a current SEC yield of 10.75%.

After JEPQ launched, I researched the fund and decided it should provide returns superior to QYLD. I was able to determine this because I purchased equal dollar amounts of QYLD and JEPQ in my “experiments” brokerage account. In September 2022, I recommended that my subscribers sell QYLD and buy JEPQ.

The Invesco QQQ Trust ETF (QQQ) tracks the Nasdaq 100 index. From September to the end of the year, QQQ dropped by 15%. The QYLD position retained slightly more value through that period than the JEPQ holding. The numbers were always close, but JEPQ could not catch up.

Since the start of the year, QQQ has taken off and is up 37% year to date. Over that period, the JEPQ position’s value caught up to and surpassed QYLD.

With dividends automatically reinvested, the QYLD position is up 10.7%. JEPQ has gained 14.0%. I rate that as a big win for JEPQ!

Over that time, I have determined with these funds, or any high-yield, variable dividend investments; you should not use automatic dividend reinvestment. Because of the variability, automatic dividend reinvestment does not always produce dividend growth.

Currently, I recommend to my subscribers to take variable dividends in cash and invest them into our stable dividend investments, which ensures dividend income growth. To see what those are, click below.

Author: Tim PlaehnTim is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory focused on creating a high-yield income stream and it's companion service The Dividend Hunter Insiders, Weekly Income Accelerator, a covered call trading service, and for investors looking for long-term total returns from their income investments using stocks with ever-growing dividend payments, he offers Monthly Dividend Multiplier. He co-edits POWR Income with Jay Soloff. Prior to his work with Investors Alley, Tim was a stock broker, a Certified Financial Planner, and F-16 Fighter pilot and instructor with the United States Air Force. During his time in the service he was stationed at various military locations in the U.S., Europe, and Asia. Tim graduated from the United States Air Force Academy with a degree in mathematics. In his free time he tours the United States parks, campgrounds, and wilderness areas in his travel trailer.
Subscribe to all of Tim Plaehn’s free investing research