Marvell Technology MRVL recently launched a range of products, such as Nova 2, 3D SiPho Engine, Spica Gen2-T and COLORZ 800, at the Optical Fiber Communication Conference and Exhibition, 2024 (OFC-2024).
Abbott Laboratories, Inc. ABT recently announced the receipt of CE Mark in Europe for its Assert-IQ insertable cardiac monitor (ICM). The ICM offers physicians a new option for diagnostic evaluation and long-term monitoring of peo
With the majority of the industry foaming at the mouth in anticipation of USDA's next numbers, let's take our annual look at what we already know about grain stocks and expected spring plantings.
June S&P 500 E-Mini futures (ESM24) are trending up +0.35% this morning after three major U.S. benchmark indices ended the regular session lower, with investors awaiting the release of the Federal Reserve’s favorite inflation gauge and other economic data due later this week to assess the Fed’s policy path.
AudioCodes Ltd. AUDC has teamed up with Tata Tele Business Services (“TTBS”) to introduce Smartflo UCaaS, a unified communication solution powered by Microsoft Teams, to enterprise clients in India. Leveraging the AudioCodes Live
OVHcloud US and OneNeck IT Solutions LLC have forged a strategic partnership aimed at revolutionizing cloud services for enterprises. By integrating OVHcloud's infrastructure into OneNeck's portfolio, the collaboration promises su
An unusual calm enveloping foreign exchange markets is extending the life of a lucrative trade beyond what many had expected. The so-called carry trade had been expected to fade as major central banks pivot away from hiking rates toward easing policy.
Orange S.A. ORAN and MASMOVIL have announced the completion of their agreement to form a new joint venture (JV) in Spain by merging their operations. Shareholders of Orange and MASMOVIL each hold a 50% share in the joint venture,
Eastman Chemical Company EMN has announced that its molecular recycling facility, located in Kingsport, TN, met its initial production goals and is already generating revenues. The company aims to ramp up production at the plant i
The Progressive Corp, PGR a current Zacks Rank #1 (Strong Buy), is a massive American insurance company. Analysts have taken their earnings expectations higher across the board.
Take-Two Interactive Software TTWO is a leading developer and publisher of video games. Analysts have taken a bearish stance on the company’s outlook, landing the stock into an unfavorable Zacks Rank #5 (Strong Sell).
China's yuan is sliding and market participants suspect authorities are deliberately but slowly engineering a light depreciation of the currency, both to complement an easy monetary policy and to support exports.
As so often with markets, it may be time to get a bit anxious when all around see nothing but blue skies.. Trot out almost any macro market metric you care to think of these days and there appears to be a positive twist - at least for record high stock markets that have clocked up more than 10% gains for a first quarter that was marked at the outset by much investor angst and trepidation.
UPS stock (NYSE: UPS) currently trades at $156 per share, 32% below the peak level of $232 seen in February 2022, and it seems appropriately priced, in our view. UPS stock was trading at around $182 in early June 2022, just before the Fed started increasing rates, and is now
Boeing stock (NYSE: BA) has seen a decline of 10% from levels of $215 in early January 2021 to around $190 now, vs. an increase of about 40% for the S&P 500 over this roughly three-year period. This underperformance can be attributed to a 30% cut in its P/S ratio from 2.1x in
Micron Technology (NASDAQ: MU) posted a solid set of Q2 FY’24 results last week and provided upbeat guidance, as the company benefited from higher memory prices and rising demand for High Bandwidth Memory (HBM) targeted at AI applications. Micron’s revenue for the qua
Striking the right balance between gaining exposure to the growth offered by top tech stocks and gaining income through dividend stocks can be a challenge for many investors. With a portfolio full of
top tech stocks and a massive 9% dividend yield, the JPMorgan Nasdaq Equity Premium Income ETF (
NASDAQ:JEPQ
) enables investors to achieve both of these aims through one ETF.
I’m bullish on this popular dividend ETF from JPMorgan Chase & Co. (
NYSE:JPM
) based on its portfolio of highly-rated tech and growth stocks, monthly dividend payout, and above-average dividend yield. However, no investment opportunity is without risks, so there are also some caveats that we’ll discuss within this article.
What Is the JEPQ ETF’s Strategy?
Fund sponsor JPMorgan explained, “JPMorgan Nasdaq Equity Premium Income ETF seeks to deliver monthly distributable income and Nasdaq 100 exposure with less volatility.”
Essentially, this is an actively-managed fund that invests in the stocks of the Nasdaq 100 Index (
NDX
) and sells covered calls to produce monthly income for its holders. The ETF only launched in May 2022, but thanks to its high 9% yield and blue-chip sponsor, it has already grown to $11.6 billion in assets under management (AUM), making it one of the market’s largest actively-managed ETFs.
JEPQ is an appealing option for income investors or for growth investors looking to add some yield to their portfolios. It pays a monthly distribution, and it generates this income by owning some
dividend stocks and, as mentioned earlier, selling covered calls to generate additional income.
Not only does JEPQ pay investors monthly, but its 9% yield is extremely appealing because it’s significantly higher than the average yields offered by U.S. equities (1.4%), U.S. 10-year treasury bonds (3.9%), global REITs (4.3%), and even U.S. high-yield bonds (7.6%).
This is a great ETF for earning significant monthly income. However, there’s no such thing as a “free lunch,” and anything that sounds this good usually comes with some type of tradeoff.
The tradeoff for this high monthly payout is that an ETF like JEPQ inevitably leaves some potential total return on the table as selling covered calls caps some of the upside from the price appreciation of its holdings because if the price of the underlying stock rises beyond the strike price of the option, JEPQ investors won’t benefit from the additional gains.
You can see this for yourself. For example, JEPQ owns most of the same mega-cap tech stocks that dominate the Nasdaq. JEPQ posted a very nice total return of 36.2% in 2023, while the Invesco QQQ Trust (
NASDAQ:QQQ
), which is meant to track the Nasdaq 100, generated a much higher 54.9% simply by holding the Nasdaq’s top stocks.
As you can see, an investor in JEPQ actually trailed the total return of the Nasdaq by a significant margin, even when accounting for the significant dividend income they received from JEPQ.
As long as investors understand this tradeoff and are comfortable with potentially forgoing higher total returns in exchange for a steady stream of monthly income, then JEPQ is worth a spot in a balanced portfolio.
It should also be noted that according to its prospectus, JEPQ can invest up to 20% of its assets into equity-linked notes (ELNs). According to the prospectus, these are “derivative instruments that are specifically designed to combine the economic characteristics of the S&P 500 Index (
SPX
) and written call options in a single note form and are not traded on an exchange.” As you’ll see in the holdings section below, these ELNs currently make up 14.6% of JEPQ’s portfolio.
One additional note for potential investors to be aware of is that JEPQ’s payouts can vary from month to month and aren’t set in stone, but they are usually within a similar range. For example, looking at the
ETF’s dividend history on TipRanks, JEPQ paid a dividend of $0.39 in January. The payout fell to $0.34 in February but rebounded to $0.38 in March.
Experience Counts
Another appealing aspect of JEPQ is that while this is a complex, active strategy, it has an experienced team running it. Lead portfolio manager Hamilton Reiner has over 30 years of experience investing in equities and equity derivatives (and 37 years in the investment industry), and he is joined by two other seasoned managers.
Note that Reiner is the same portfolio manager who runs the JPMorgan Equity Premium Income ETF (
NYSEARCA:JEPI
), a similar ETF that
yields 7.6% and is extremely
popular with dividend investors.
JEPQ’s Top Holdings
JEPQ holds 88 positions, and its top 10 holdings account for 53.9% of the fund. Below is an overview of
JEPQ’s top 10 holdings using TipRanks’ holdings tool.
As you can see, unlike many dividend ETFs that achieve high yields by investing in high-yield stocks with little to no growth, JEPQ gives investors exposure to the mega-cap tech powerhouses like Microsoft (
NASDAQ:MSFT
), Nvidia (
NASDAQ:NVDA
), Amazon (
NASDAQ:AMZN
), Meta Platforms (
NASDAQ:META
), and Broadcom (
NASDAQ:AVGO
) that are leading the stock market higher.
Beyond tech stocks, JEPQ also holds positions in other prominent Nasdaq stocks, like Pepsi (
NASDAQ:PEP
), Costco (
NASDAQ:COST
), and Mondelez (
NASDAQ:MDLZ
), which are all dividend payers.
Note that, as discussed above, the ELNs are currently JEPQ’s largest position at 14.6%, and the fund can invest up to 20% of its assets in these instruments.
What Is JEPQ’s Expense Ratio?
JEPQ features an expense ratio of 0.35%. This means that an investor in the fund will pay $35 in fees on a $10,000 investment annually. While this isn’t as cheap as some of the broad-market index funds out there, it seems reasonable enough for an active ETF with a fairly complex strategy. It’s also significantly cheaper than the average expense ratio for all ETFs, which is 0.57%.
Is JEPQ Stock a Buy, According to Analysts?
Turning to Wall Street, JEPQ earns a Moderate Buy consensus rating based on 78 Buys, 10 Holds, and zero Sell ratings assigned in the past three months. The
average JEPQ stock price target of $58.77 implies 8.5% upside potential.
A Steady Stream of Dividend Income
For investors who are alright with potentially leaving some upside on the table in terms of capital appreciation in a bull market, JEPQ is a great way to add substantial monthly income to a portfolio.
I also like the fact that JEPQ gives investors this 9% yield while giving them exposure to compelling tech and growth stocks rather than no- or low-growth stocks like many high-yield ETFs. I’m bullish on JEPQ based on its strong portfolio of top tech stocks, its 9% dividend yield, and its monthly payout schedule.
Disclosure
TipRanks
Checked
5 minutes 45 seconds ago
This feed is responsible for generating the rss feed related to the topic Stocks