Stability in a volatile market? Inside an S&P 500 ETF delivering double-digit percentage dividends

Investors may consider JPMorgan’s Equity Premium Income Fund ETF for more reliable gains in today’s volatile market environment. According to the firm, the ETF generates monthly income for investors using S&P 500 options and proprietary data. This strategy intends to provide investors with income even during market uncertainty. The fund has been around since May 2020. JPMorgan’s Bryon Lake is behind the ETF. In an interview with CNBC’s “ETF Edge” this week, he highlighted the importance of investing defensively right now, noting the fund aims to invest in companies with a solid balance sheet. Hershey, Progressive, and Bristol-Myers Squibb were listed as key names because they historically pay between 2% and 3% dividends. Yet, as of October 31, the ETF is paying a 14% monthly dividend. 

So, how does that math add up? “Remember, the premium that comes from those options is dictated by the volatility in the market. And if you look at this year, we’ve had volatility so that’s pushed that premium up. Therefore, we’ve been able to harvest that,” according to Lake, global head of ETF Solutions at JPMorgan Asset Management. “Historically, we target about a 6% to 8% yield on this portfolio. … But we’re pushing because of the increased volatility this year.” Lake added his clients are always looking for income, whether they are bullish or bearish. “Investors are saying, ‘I want to get completely out of equities. I know that’s an important part of my portfolio. Maybe I’ll own this portfolio where I can harvest some income… provides a little bit of downside protection, and that allows me to navigate these tricky markets as well,’” he said. Lake acknowledged, though, that things could go wrong. “The volatility could come down, and therefore we’d be collecting slightly less premium, and that yield would come down along with that,” he said. The JPMorgan Equity Premium Income Fund ETF is outperforming the S&P 500 year to date. But they’re still both in the red. The ETF is down almost 15%, while the S&P is off about 21%.

By browsing this website, you agree to our privacy policy.
I Agree