How does JEPI pay such a high dividend? (2024)

How does JEPI pay such a high dividend?

It's important for investors to understand that JEPI is not a pure equity ETF, it's a covered call ETF, which generates a high yield by selling call options against holdings within the portfolio.

How does JEPI yield so high?

However, JEPI also employs covered calls – options that are sold to collect a premium – to supercharge the dividends on those stocks. And the extra premiums from those options contracts help add up to a tremendous yield. Indeed, JEPI throws off a yield more than six times the broader S&P 500!

What is the downside to JEPI?

Reason #1 To Avoid JEPI: Its Expense Ratio Is Rather High

One reason why JEPI is not a great choice for retirees is that its 0.35% expense ratio is rather high compared to many other passive income funds. For example, SCHD's expense ratio is only 0.06%.

Is JEPI a good dividend stock?

Their recent payouts were impressive: JEPI's 12-month yield was 11.7% at the end of 2022, compared with only 1.7% for the S&P 500 index. The majority of this yield came from selling one-month calls on the S&P 500 and paying out all the proceeds, or call premiums.

How does JEPI make money?

Here's how it works: We use fundamental bottom-up research to build a higher-quality, lower-beta portfolio of U.S. large cap equities with less volatile earnings and share prices. We then sell index options against that long-only portfolio and use the premiums to generate income.

What is the catch with JEPI?

Cons of Investing in JEPI

Counterparty risk: Writing covered calls and using ELNs creates counterparty risk, which is the risk that the buyer of a call option won't be able to fulfill their end of the contract, or the issuer of an ELN won't be able to meet their debt obligation.

Is JEPI yield sustainable?

JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) is designed primarily for income-focused investors as it pays a monthly dividend. Based on its relatively attractive 8.3% payout, it's expected to be a core holding of income investors looking to focus on generating a sustainable monthly dividend.

Why is JEPI not good?

JEPI is not a bad ETF, but it and its peer group (covered call ETFs) are overrated by investors. And the cracks are starting to show. Extended down markets that don't immediately get back up are a risk to these ETFs not fully understood by many investors.

Can you live off JEPI?

If you're an investor seeking immediate cash flow, JEPI may be an excellent choice. The fund is designed to generate consistent monthly income, making it an attractive option for those looking to live off their investments.

Is JEPI good for long term?

About 6% to 8% returns, or roughly 85% of the market's long-term upside potential, but with 5% to 8% yield and about 35% less volatility. That's the true investment thesis for JEPI, which all investors need to realize. JEPI's long-term yield, per management guidance, is 6% to 7%.

Should I buy JEPI or SCHD?

SCHD has never had an exceptionally high dividend yield and hovers around 2.5% to 3.5%. JEPI, on the other hand, has a significantly higher dividend yield than SCHD, with a very impressive 11.7% yield in 2022.

What is better than JEPI?

SPYI Outperforms Within Equity Income Category

Though the fund has less AUM, it has offered consistent outperformance within the class since its inception. Comparing the two funds, JEPI generated total returns of 14.07% between 08/30/2022 (SPYI's inception) and 1/31/2204 according to Morningstar data.

Why is JEPI underperforming?

JEPI's underperformance was due to the fund's reduced potential capital gains, product of its covered call strategy, and due to being underweight tech, which has performed exceedingly well YTD.

Is JEPI a bad investment?

JEPI is a terrific ETF for income investors, but it's not perfect and investors shouldn't focus just on the high yield. JEPI is a terrific ETF for income investors, but it's not perfect and investors shouldn't focus just on the high yield.

Is JEPI taxed as income?

JEPI may be tax-inefficient, as distributions from the fund may be taxed as income, and dividends from underlying stock holdings are not considered qualified because of the offsetting options positions.

What ETF has 12% yield?

What ETF pays highest dividend?

What is the best dividend ETF?

Are JEPI and JEPQ safe?

JEPQ has outperformed JEPI in the early stages, but these are relatively new funds untested in a bear market, which could introduce unexpected risk with market volatility. Conservative investors may not be comfortable with the lack of historical performance data.

What are the top 10 holdings of JEPI?

What is the average dividend for JEPI?

JPMorgan Equity Premium Income ETF (JEPI)

JEPI has a dividend yield of 7.87% and paid $4.47 per share in the past year. The dividend is paid every month and the last ex-dividend date was Feb 1, 2024.

What fund is similar to JEPI?

Is JEPI a good investment for 2024?

The JEPI ETF's use of Equity-Linked Notes, or ELNs, resulted in higher tax rates for investors. The outlook for JEPI in 2024 is uncertain, with potential underperformance if the S&P 500 is led higher by the Magnificent Seven.

What is the future of JEPI?

JEPI 12 Months Forecast

Based on 119 Wall Street analysts offering 12 month price targets to JEPI holdings in the last 3 months. The average price target is $60.87 with a high forecast of $67.79 and a low forecast of $52.44. The average price target represents a 7.24% change from the last price of $56.76.

Should you hold JEPI in a taxable account?

Rather than 0%, 10%, 15%, 20%, or 23.8% tax rates, as is the case with qualified dividends, just 15% to 20% of JEPI's dividends are qualified. This means owning it in a tax-deferred retirement account is optimal.