An Attractive Yield-Generating ETF Play in a Volatile Market | ETF Trends

Income-minded investors who are looking for ways to diversify their portfolios and enhance their yields can consider an options exchange traded fund strategy to deliver monthly dividends.

Specifically, the recently launched JPMorgan Equity Premium Income ETF (JEPI) shows an 11.85% 30-day SEC yield.

The JPMorgan Equity Premium Income ETF targets a significant portion of S&P 500 returns with less volatility, seeking annualized income distributed monthly. The fund leverages an experienced equity management team comprising more than 50 years of combined experience and headed by 32-year industry veteran Hamilton Reiner as the lead portfolio manager.

JEPI tries to generate income through a combination of selling options and investing in U.S. large cap stocks, providing investors with a monthly income stream from associated option premiums and stock dividends. Furthermore, the fund managers try to construct a diversified, low volatility equity portfolio through a proprietary research process designed to identify over- and under-valued stocks with attractive risk-to-return characteristics.

The actively managed ETF is an adaptation of the JPMorgan Equity Premium Income Fund (JEPIX), which has been running since August 2018.

“The Equity Premium Income Fund provides diverse opportunities to earn income from both dividends and options premiums. A unique feature of this fund is the monthly payout of all income earned — so what you earn is what you keep. The result is consistent monthly income even in volatile market environments,” according to J.P. Morgan Asset Management.

Furthermore, this yield-generating strategy may help fixed-income investors diversify their total return portfolio with lower equity risk.

“The Fund acts as an income diversifier given its ability to distribute income without exposure to the duration or interest risk relative to other income-yielding products. By selling call options on the Fund’s managed volatility, diversified large-cap stock portfolio, the Fund seeks to deliver monthly income with less volatility than the broader market,” according to J.P. Morgan Asset Management.

For more information on dividend-paying strategies, visit our dividend ETFs category.