Key Points in This Article: Covered call ETFs generate high yields by selling call options on stock portfolios, appealing to income-focused investors.
Exchange-traded funds have become a popular investment option for investors seeking to establish a passive income strategy.
On this week's episode of ETF Prime, Cinthia Murphy, investment strategist at TMX VettaFi, joins host Nate Geraci to discuss ETF flows in the first half of 2025, new ETF innovations and more. Next, Joel Schneider, deputy head of portfolio management at Dimensional, discusses the firm's milestones, approach to investing and multi-share class structure.
Dividends play a significant role in an investor's portfolio and if you're looking for passive income, JEPI and SDIV won't disappoint.
The “4% rule” can keep many income investors safe, especially with all the double-digit percentage yielding dividend traps out there that lure yield-hungry investors into a one-two punch of pain (dividend cuts and capital depreciation).
JEPI offers monthly income and capital appreciation potential through a covered call strategy on large-cap stocks, now overweight in technology. The ETF's portfolio shift toward tech and AI leaders like Nvidia, Meta, and Amazon positions it to benefit from rapid AI market growth. JEPI currently yields a robust 8.4%, making it attractive for investors seeking high, predictable income and downside protection.
JEPI offers steady, monthly income by combining a diversified portfolio of stable U.S. stocks with option premiums from equity-linked notes, not return of capital. The ETF is less volatile than the S&P 500, making it ideal for conservative investors or as a stabilizer in higher-yield portfolios. JEPI's yield typically ranges from 7–8%, but distributions are taxed as ordinary income, so it's best held in tax-advantaged accounts.
JEPI remains attractive for income-focused investors, offering an 8.5% yield and lower volatility via its covered call strategy. The ETF's diversified, high-quality holdings and a beta of 0.57 help buffer against market swings, though it won't fully protect against sharp corrections or bear market drawdowns. JEPI's valuation is in line with the S&P 500, so it doesn't offer a value discount, but its income and risk profile still appeal in uncertain times.
JPMorgan Equity Premium Income ETF offers high monthly income and lower volatility, making it attractive for risk-averse, income-focused investors seeking equity exposure. The ETF's covered call strategy caps upside potential, so it will likely underperform the S&P 500 during strong bull markets. Given the recent sharp market rally and JEPI's high correlation to the S&P 500, I see no compelling reason to buy right now.
JPMorgan Equity Premium Income ETF offers a high 8.36% yield and lower volatility, making it attractive for income-focused investors seeking equity exposure with reduced risk. Nonetheless, the 20% covered calls exposure in the portfolio allows them to outperform mainly in flat markets, and that scenario is unlikely to occur in the current landscape. Given current market uncertainties and the likelihood of directional moves, I rate JEPI as a "sell", as it currently lacks tactical appeal.
High-yield funds are popular passive income machines. However, some are overrated whereas others are underrated by Mr. Market. I discuss one that I think is being overrated by investors and another that is being underrated.
JEPI is a covered call ETF that goes long the S&P 500 stocks and also writes covered calls to reduce volatility and generate income. With the Buffett indicator currently at 200%, it might be wise to hedge the market right now. With JEPI you can hedge against market risk while generating income.