This is a time when buying quality assets is the absolute best course of action; JPMorgan Equity Premium Income ETF (JEPI) is just that kind of asset, suggests Bryan Perry, editor of Cash Machine— and a participant in The Interactive MoneyShow Virtual Expo on March 22-24. Register here for free.
This income and growth ETF has over $6.5 billion in assets under management and pays a current yield of 7.05%. When there is little room for error in a no-excuses market, where the strong survive and thrive, JEPI fits this profile to a tee.
JEPI curates its portfolio by selecting equities from the S&P 500 Index using a process to identify value stocks with favorable risk/return characteristics along with environmental, social and corporate governance (ESG) considerations.
After selecting and ranking the securities, the final portfolio looks to hold those assets with lower volatility relative to the benchmark index.
In addition, the fund’s advisor enters equity-linked notes to provide the returns of the S&P 500 Index by writing covered call options. The objective is to provide the same return as the S&P 500 Index with lower volatility over a three- to five-year period combined with monthly income.
An equity-linked note (ELN) is an investment product that combines a fixed-income investment with additional potential returns that are tied to the performance of equities. Equity-linked notes are usually structured to return the initial investment with a variable interest portion that depends on the performance of the linked equity.
The fund has 94 total holdings and an excellent set of top holdings that I am truly excited to own. There is a very compelling blend of utility, technology, fintech, pharmaceutical, IT consulting, insurance, transportation and consumer staples rounding out the top 10 holdings.
If one reviews all the holdings in the fund, it will be easy to understand why I’m all in on this recommendation in a market where the ground has shifted into lower price-to-earnings value-oriented stocks with highly visible sales and earnings growth.
JEPI has a beta rating of 0.54. Here is what that means. The S&P has a beta of 1.0, so any number above that implies more volatility and any number under implies less volatility. A beta of 0.54 means JEPI is about half as volatile as the market and therefore provides for a more defensive investment when days like yesterday occur.
JPMorgan launched JEPI in late May 2020 just as the market was beginning to recover from the pandemic low. The investment firm’s timing was almost impeccable, which is a credit to its vaunted investment banking arm. As a bonus, the fund pays out monthly.
Because the fund uses an active ELN and covered-call strategy to generate a high-yield stream of unleveraged income, the dividend payouts will be variable month-to-month. In the case of JEPI, the managers tally up the trailing dividends paid, and display the average dividend yield for that rolling period on a blend-ed basis.
I think the management team has proven highly capable of producing solid returns in periods of skittish market conditions. Let’s put this instrument of high-net-worth clients to use in our Accelerated Income Portfolio and lock in this 7% yield while we can. Buy JPMorgan Equity Premium Income ETF under $62.