From 24/7 Wall St. · Ryne Mauck · · 3m
3 covered call ETFs that pay 8% and grow your money
Most covered call ETFs drain your principal while paying dividends, but three actively managed funds have cracked the code.
In brief
Most covered call ETFs drain your principal while paying dividends, but three actively managed funds have cracked the code. JEPI, GPIX, and DIVO use different strategies to deliver both high monthly income and share price growth, each suited to different investor goals. Originally reported by 24/7 Wall St..
The covered call trap
Traditional covered call ETFs like QYLD write calls on entire portfolios, harvesting premiums while capping all upside. Investors get monthly checks but watch share prices drift lower in rallies.
Three funds solved it differently
JPMorgan Equity Premium Income ETF, Amplify CWP Enhanced Dividend Income ETF, and Goldman Sachs S&P 500 Core Premium Income ETF each pay near or above 8% while delivering positive share price appreciation.
Why selective overlays work
These funds write calls on only a slice of holdings, use equity-linked notes instead of direct options, or pick strikes dynamically. This lets most of the portfolio participate in rallies while still harvesting premium.
GPIX: dynamic volatility overlay
Goldman's GPIX replicates the S&P 500 and writes calls on 25% to 75% of the portfolio based on market conditions. Since October 2023, it has returned 80% on price and pays roughly 8% yield.
GPIX beats SPY on price
GPIX is up 12% year-to-date and 17% over the past year, beating SPY's 12% and 16% returns. The portfolio holds $4.7 billion in assets anchored by Apple, Alphabet, and Amazon.
GPIX's untested downside
GPIX has never operated through a sustained bear market, so how the overlay performs during real drawdowns remains unknown. The short track record is the main tradeoff.
JEPI: the category giant
JPMorgan's JEPI holds $44.7 billion in assets and pairs a low-volatility stock basket with equity-linked notes from banks. This structure lets stock pickers let winners run while harvesting premium separately.
JEPI pays 8% with measured growth
JEPI distributes about $4.58 per share for an 8% trailing yield. It is up 4% year-to-date, 7% over one year, and 42% over five years, intentionally lagging the broader market.
DIVO: tactical dividend growers
Amplify's DIVO holds roughly two dozen blue-chip dividend growers and writes calls only on select positions when premiums look favorable. It pays closer to 6% yield but matches SPY's price returns.
DIVO's concentration risk
DIVO holds only 25 or so positions with Caterpillar at 7% and Apple at 5%. One bad quarter from a top holding hits harder than in JEPI's 100-plus name portfolio. Assets total $7.2 billion.
Pick the right tool for you
Income-first retirees favor JEPI for stability. Growth-focused investors want GPIX for 8% yield with S&P 500 exposure. Accumulators prefer DIVO for dividend growth and price appreciation with options as seasoning.
What matters most
JEPI, GPIX, and DIVO use different strategies to deliver both high monthly income and share price growth, each suited to different investor goals.
