Broad speaking, S&P 500 dividend news has been negative to this point in 2020, but the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) isn’t being harmed by those glum headlines. In fact, due to its unique strategy, NUSI is lobbing off impressive income while reducing the traditional equity market risk for investors.
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Investors have long capitalized on covered call options strategies for income generation or protective put options strategies to protect against and limit losses.
“March 2020 announcements turned negative, as 13 issues announced cuts, with 10 of them being suspensions, making for a total forward impact of USD 13.9 billion, and more cuts are expected,” according to S&P Dow Jones Indices. “For U.S. common issues, the net-indicated dividend change was USD -5.5 billion, with the last negative in Q2 2009 (USD -4.9 billion) and the previous record low in Q2 2009 (USD -43.8 billion).”
NUSI avoids some of the current dividend risks with the S&P 500 because the Nationwide ETF is an income-generating spin on the Nasdaq-100 Index (NDX), an index lightly allocated dividend-offending sectors, such as energy and real estate.
Now For NUSI
With companies no focusing on servicing debt and bolstering cash positions, meaning buybacks and dividends are faltering, alternative income-generating strategies such as NUSI are increasingly useful to investors.
“March 2020 (and the first six trading days of April 2020), however, gave a glimpse of what Q2 2020 may look like, as dividend cuts and suspensions started to be announced, with suspensions more prevalent. For 2020, liquidity and cost control are now the top priorities, with dividends lower and buybacks an endangered species,” according to S&P Dow Jones.
NUSI is an actively managed portfolio of stocks included in the Nasdaq-100 Index and an options collar. Per index rules, the fund only invests in the top 100 largest by market cap, nonfinancial stocks listed on NASDAQ. A collar strategy involves selling or writing call options and buying put options, thus generating income to hedge some downside risk. The strategy seeks to generate high current income monthly from any dividends received from the underlying stock and the option premiums retained.
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Adding to its income allure, NUSI pays a monthly dividend.
For more on income strategies, visit our Retirement Income Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.