This monthly distribution ETF currently trades on a 9.6% dividend yield.
An ETF that gives you exposure to tech stocks and a high-yield
Lee Samaha (JPMorgan Nasdaq Equity Premium Income ETF): One of the problems of investing in high-yield stocks is that it tends to result in an unintended sector or style bias manifested in your portfolio.
In plain English, you might end up with a portfolio overloaded with stock in a sector that happened to trade on high yields at the time, such as oil and gas exploration and production companies. Similarly, high-yield equities often have certain characteristics, such as being low growth mature "cash cow" type companies.
Both outcomes are fine for many investors, but this JPMorgan ETF might be the answer for investors who prefer a more flexible approach. The ETF invests 80% of its assets in equities. The prospectus claims it invests "significantly" in Nasdaq 100 equities, but the management has the latitude to also invest in equities outside the Nasdaq 100 index. The key point here is that its management is actively managing the ETF to invest in growth stocks, and dividend yield is not a priority.
The main income generator of the ETF comes from its investment (up to 20% of the ETF's assets) in equity-linked notes (ELN) that sell call options on the Nasdaq 100. As such, the ETF picks up a premium when the index falls or doesn't rise above the strike price on the option.
The option strategy will lose money when the markets are on fire but earn premiums when they are relatively quiet or declining. As such, the upside of the ETF is limited (although it's still likely to appreciate if tech stocks are doing well), but so is the downside. However, investors will simultaneously receive a monthly distribution, exposure to growth stocks, and a handsome dividend.
