Many of these ETFs use covered-call strategies to enhance their payouts. They own a portfolio of securities while selling call options against those holdings, collecting option premiums that are distributed to shareholders. The trade-off is that investors receive higher income but give up part of the upside when markets rally strongly.
According to TipRanks’ High Dividend Yield ETFs tool, three funds currently stand out with dividend yields of at least 10%: J.P. Morgan Nasdaq Equity Premium Income ETF (JEPQ), Goldman Sachs Nasdaq 100 Core Premium Income ETF (GPIQ), and Invesco QQQ Income Advantage ETF (QQA).
Here’s what investors should know about each one.
J.P. Morgan Nasdaq Equity Premium Income ETF (JEPQ)
JEPQ takes a different approach from many income-focused ETFs by balancing dividend income with long-term capital appreciation. The fund actively invests in many of the Nasdaq’s largest companies while using equity-linked notes (ELNs) to implement a covered-call strategy, generating additional option income without writing calls directly on its entire portfolio.
