JEPI: 11% Yield, Monthly Payer Vs. Alternative S&P High Yield Funds

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Looking for a mode to harness volatility and adhd immoderate defence to your portfolio? Maybe you should see utilizing covered call/buy-write funds successful bid to execute this.

This nonfiction volition absorption connected S&P-500-based covered telephone funds, which seek to heighten output and/or lessen volatility via covered calls.

The JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) is 1 of the much heavily-traded covered telephone funds. It's a comparatively caller money - it IPO'd successful May 2020.



"Seeks existent income portion maintaining prospects for superior appreciation. The money seeks to supply the bulk of the returns associated with its superior benchmark, the S & P 500 Total Return Index, portion exposing investors to little hazard done little volatility and inactive offering incremental income.

JEPI usually invests astatine slightest 80% of its assets successful equity securities, but it whitethorn besides put successful different equity securities not included successful the S&P 500 Index. The money "generates income done a operation of selling options and investing successful U.S. ample headdress stocks, seeking to present a monthly income watercourse from associated enactment premiums and banal dividends."

(JEPI site)

JEPI & Other S&P Covered Call Funds:

There are galore different S&P-based buy/write funds successful the market. JEPI is the newest and largest of these funds, with a 5/20/20 inception date, assets of $17B, and regular mean measurement of 3.4M shares. JEPI besides has the lowest disbursal ratio successful the group, astatine 0.35%.

We person 1 different ETF, the Global X S&P 500 Covered Call ETF (XYLD), which was founded successful 2013, and 4 Closed End Funds (CEFs) successful this group, which were founded successful 2004-2005:

  • Eaton Vance Tax-Managed Buy-Write Income Fund (ETB)
  • Nuveen S&P 500 Buy-Write Income Fund (BXMX)
  • Nuveen S&P 500 Dynamic Overwrite Fund (SPXX)
  • BlackRock Enhanced Capital & Income Fund (CII)

XYLD is the 2nd largest money successful this group, astatine $2B - it besides pays monthly, has 505 holdings, a debased 0.60% disbursal ratio, and regular mean measurement of 3.4M shares.

The BXMX CEF is the 3rd largest fund, with $1.3B successful assets, 254 holdings, and 189K successful regular mean volume.

CII holds $763M successful assets, with conscionable 56 holdings, and 102K successful mean volume, followed by ETB, with $379M successful assets, and 69K successful volume, 172 holdings, and a 1.1% disbursal ratio.

SPXX is the smallest money successful the group, with $262M successful assets, a .89% disbursal ratio, 528 holdings, and 47K successful mean volume.

BXMX and SPXX wage quarterly, portion the different 4 funds wage monthly:


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JEPI pays a adaptable monthly distribution, truthful we looked astatine its dividend output connected a trailing and guardant basis. Its existent trailing dividend output is 10.57%, portion its guardant output is overmuch higher, astatine 13.38%. It should spell ex-dividend adjacent connected ~2/1/22, with a ~2/4/22 wage date.


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JEPI has the highest guardant output successful the group, followed by XYLD, which has the highest trailing yield. ETB decreased its monthly payout from $.1080 to $.0932 successful November 2022 - its guardant output is 7.54%, followed by SPXX, astatine 7.41%, BXMX, astatine 7.17%, and CII, astatine 6.49%:


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The assemblage show of the S&P 500 inactive shows Energy arsenic the #1 assemblage successful 2022, a slot it has occupied each year. Energy was up 39.6% successful 2022. Utilities were #2, astatine -1.61%. Tech was a large loser, down ~34%.

Unfortunately, JEPI lone has minimal, 2.7%, vulnerability to Energy. Its largest assemblage vulnerability is Industrials, astatine 13%, vs. an 8.6% Industrials weighting successful the S&P. JEPI besides had a heavier weighting successful Consumer Defensive, astatine 11.9%, vs. 6.86% for the S&P, and Utilities, astatine 7.8%, vs. 2.78% for the S&P.

Those heavier-than-S&P assemblage weightings benefited JEPI, arsenic those sectors outperformed the market.

On the flip side, JEPI was underweight Tech, but inactive held 11%, which wounded its performance, with Tech down -34%. Consumer Cyclicals, Communications Services were besides underweight sectors for JEPI which fell -37% and -40%, respectively:


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JEPI has held up the champion successful 2022 and implicit the past quarter, outperforming the marketplace successful 2022, but inactive down -12.49%, vs. -19.70% for the S&P, arsenic of 12/28/22.


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On an approximate full instrumentality basis, including its dividend yield, JEPI outperformed each of the different funds, returning ~-1.4%, vs. -18.4% for the S&P 500.

SPXX was #2, astatine -4.63%, followed by CII, astatine -7.66%, XYLD, astatine -9%, ETB, astatine -12.77%, with BXMX finishing last, astatine -14.55%:

total return

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JEPI besides invests successful Equity-Linked Notes (ELNs), which it utilizes for income:

"The Fund whitethorn put up to 20% of its nett assets successful ELNs. ELNs are structured arsenic notes that are issued by counterparties, including banks, broker-dealers oregon their affiliates, and that are designed to connection a instrumentality linked to the underlying instruments wrong the ELN. ELNs successful which the Fund invests are derivative instruments that are specially designed to harvester the economical characteristics of the S&P500 Index and written telephone options successful a azygous enactment form." (JEPI site)

JEPI's apical 10 holdings see tiny amounts, 1.5% to 1.6%, of acquainted ample headdress stocks AbbVie (ABBV), Bristol Myers Squibb (BMY), UnitedHealth (UNH), Progressive (PGR), Coca-Cola (KO), and Hershey (HSY), totaling ~15% of its full portfolio.

top 10

JEPI site


Unlike CEFs, ETFs mostly merchantability astatine prices adjacent to their NAV/share values, arsenic you tin spot with JEPI's and XYLD's 12/28/22 Price/NAV.

Since CEFs tin merchantability astatine wide discounts oregon premiums implicit the years, it tin beryllium a utile strategy to comparison their existent Price/NAV vs. their humanities averages.

In this group, ETB has the biggest dispersed betwixt its 12/28/22 Price/NAV of -0.31%, and its 1-, 3-, and 5-year premiums to NAV of 8.76%, 4.82%, and 4.23%.


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Parting Thoughts:

With the Fed looking to support raising its complaint successful 2023, JEPI could beryllium a utile instrumentality for gaining immoderate extortion for your portfolio. However, if the Fed backs disconnected successful the 2nd fractional of the year, the S&P could rally, successful which case, having S&P-based covered calls could crimp your upside potential.

If you person a existent favourite Covered Call fund, we'd similar to perceive astir successful the comments conception of this article.

All tables furnished by Hidden Dividend Stocks Plus, unless different noted.

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Source Seekingalpha