1 Very High Yielding ETF I Can’t Wait to Buy More of in June

This ETF will provide me with a premium income stream and upside potential.

I love collecting passive income. It’s nice to get paid for work you don’t have to do. I love generating passive income so much that my main financial goal is to earn enough each year to cover my recurring expenses. That way, I won’t have to work to live.

I still have a long way to go. However, I get a little closer to my goal each month as I increase my passive income. I focus on investing in companies and funds that offer higher yield payouts that are expected to increase steadily over time. One of my more recent additions focused on income is the JPMorgan Nasdaq Equity Premium ETF (JEPQ 0.20%). I plan to purchase more of these high-yield products exchange-traded fund (ETF) in June. Here’s why I’m excited to beef up my post this month.

A high-yielding source of income

The objective of the JPMorgan Nasdaq Equity Premium ETF is rather simple: it aims to provide monthly income to investors and exposure to the market. Nasdaq-100 Index with less volatility.

The fund generates income by writing out of the money purchase options on the Nasdaq-100 Index, which holds the 100 largest non-financial stocks listed on the growth-oriented Nasdaq Stock Exchange. This strategy allows it to generate lucrative options premiums, which it distributes to investors each month. Its most recent payment had a dividend yield of around 9.6%. This is a much higher return than other asset classes:

Image source: JPMorgan. REIT = real estate investment trusts.

Over the past year, the yield has been even higher (the trailing 12-month dividend yield is 10.1%).

However, one drawback is that the fund’s distribution payments fluctuate from month to month. They are higher in the months following periods of high volatility (higher volatility generally leads to higher option premiums).

This ETF should be able to continue to generate an attractive income yield, with its monthly payouts likely increasing over the long term as the value of the fund increases.

Strong growth (with less volatility)

The JPMorgan Nasdaq Equity Premium ETF offers more than an attractive passive income stream. The ETF also provides stock upside potential for companies in the Nasdaq-100 Index. Companies listed in this index have historically outperformed S&P500 over the long term (average annual total return of 18.8% over the last 10 years compared to 12.8% for the S&P 500). The fund holds a portfolio of stocks listed in this index, selected using a combination of applied data science and fundamental research.

The fund does not hold all of the stocks in the Nasdaq-100 Index, nor does it aim to match the weighting of that index. Here’s a look at how its top 10 stocks compare to the Invesco QQQ Trustan ETF focused on the Nasdaq-100 index:

JEPQ (% of net assets)

Invesco QQQ Trust (% of securities)

Data source: JPMorgan and Invesco.

The fund’s allocation strategy could pay off for investors. For example, the JPMorgan Equity Premium Income ETF outperformed the Nasdaq-100 Index in the first quarter (total return 10.1% to 8.7%). It benefited from a higher weighting in Nvidia (which delivered a solid performance) and an underweighting in Intel (which underperformed over the period).

The ETF’s managers believe their strategy will allow the fund to generate strong returns with less volatility than the Nasdaq-100 over the long term. The fund will benefit from volatility because it can generate more options premium income. At the same time, its underlying portfolio of high-quality, faster-growing companies is expected to generate strong appreciation in the fund’s net asset value (NAV) over the long term.

Increase my income and assets

The JPMorgan Nasdaq Equity Premium Income ETF produces a very attractive monthly income stream through the sale of call options on the Nasdaq-100 Index. It also offers attractive capital gains potential by actively managing a stock portfolio based on this index. These features should allow the ETF to help me achieve my passive income goals while growing my wealth. This wealth-creating combination is why I’m looking forward to adding to my position this month.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Matt DiLallo has positions in Alphabet, Amazon, Apple, Broadcom, Intel, Jp Morgan Exchange-Traded Fund Trust-JPMorgan Nasdaq Equity Premium Income ETF, JPMorgan Chase, Meta Platforms, Netflix and Tesla and offers the following options: long tenders of January 2025 at $30 Intel, January 2025 short sale of $30 on Intel and short sale of $50 in June 2024 on Intel. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Costco Wholesale, JPMorgan Chase, Meta Platforms, Microsoft, Netflix, Nvidia and Tesla. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short 47 calls $ in May 2024 on Intel. The Mad Motley has a disclosure policy.

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