Jepi: What You Need to Know About This High-Yield ETF

What Is Jepi? An Overview of This High Dividend ETF

Jepi is an exchange-traded fund (ETF) that tracks an index of U.S. stocks with high dividend yields. It includes companies from a variety of sectors like utilities, real estate, energy, and financials.

Jepi aims to provide higher income than the overall stock market. It currently has a dividend yield of around 5-6%, compared to 1-2% for the S&P 500. The fund pays out dividends on a monthly basis, so you’ll see the income deposited into your brokerage account regularly.

The ETF tracks the J.P. Morgan U.S. Equity Premium Income Index, which includes 100-200 of the highest yielding large-cap U.S. stocks. To qualify for the index, stocks must have a market cap over $5 billion and meet certain liquidity requirements. The fund is market-cap weighted, so larger companies make up a bigger portion of holdings. Top holdings include well-known names like AT&T, Verizon, ExxonMobil, and Chevron.

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Jepi has an expense ratio of 0.50%, which means it costs $50 per year for every $10,000 invested. While higher than some other ETFs, the fee is reasonable for an actively managed fund targeting high-yielding stocks. The ETF trades on the Cboe BZX Exchange during normal market hours.

If high monthly income and dividend stability sound appealing, Jepi could be an excellent choice for your portfolio. However, keep in mind that high-dividend stocks may underperform at times, so consider balancing Jepi with growth-focused investments.

Jepi Holdings and Investment Strategy Breakdown

The JPMorgan Equity Premium Income ETF (JEPI) aims to generate a high level of dividend income and capital appreciation. It invests in a mix of S&P 500 stocks and covered call options on those stocks.

The fund’s holdings and investment approach are designed to potentially reduce volatility and provide income, especially when markets are range-bound.

• JEPI typically holds between 125 to 225 S&P 500 stocks, selected based on factors like dividend yield, fundamentals, and options liquidity. The fund sells covered call options on a majority of its stock holdings. This options strategy can generate income but limits the potential price appreciation of holdings.

• JEPI uses a rules-based approach to select and weight stocks and manage options. The fund aims for a portfolio with a dividend yield that exceeds the S&P 500. Holdings are weighted based on factors like dividend yield, value, and quality.

• JEPI’s covered call options strategy makes it a good choice if you’re looking to generate income or reduce volatility. However, its options writing limits the potential for capital gains. The fund may underperform in strongly rising markets.

• JEPI has a 0.35% expense ratio. It pays monthly dividends and has a 30-day SEC yield of around 5%, which can vary. The fund has returned over 10% annually since its 2018 inception, with relatively low volatility for its category.

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The Pros and Cons of Investing in Jepi

Jepi is an exchange-traded fund (ETF) focused on high dividend-yielding stocks. It aims to provide investors with monthly income and the potential for capital appreciation.

Before you invest in Jepi, consider both the upsides and downsides.

On the plus side, Jepi offers a high dividend yield. The fund invests in stocks of companies with strong records of increasing their dividends over time.

This can be an attractive source of monthly income if you’re looking to supplement your portfolio.

Jepi is also very liquid since it’s an ETF, so you can buy and sell shares easily on the open market.

However, there are some negatives to keep in mind. High-dividend stocks are often value or defensive stocks.

If growth stocks are outperforming, Jepi could underperform the overall market. The fund also has a high expense ratio, which reduces your total returns over time.

There is a risk the companies Jepi invests in could cut their dividends, reducing your income and the fund’s appeal.

Sector concentration is another downside. Jepi invests heavily in utilities, consumer staples, and financial companies. If those sectors face headwinds, it could significantly impact Jepi’s performance.

The fund’s holdings are also mostly large, well-established companies. So if mid- or small-cap stocks are leading the market, Jepi would likely miss out on those opportunities.

Conclusion

While Jepi aims to provide an attractive yield and monthly income, it does come with risks. Make sure you go in with realistic expectations and understand both the potential rewards and drawbacks.