It’s well-known that most tech stocks don’t pay dividends – opting to reinvest their earnings straight back into growth instead.
This is a tradeoff investors are aware of – and one many are willing to make.
But this can leave income-focused investors in a tough spot.
They can either forgo investing in these non-dividend-paying tech stocks entirely – which would mean not investing in an ever-larger slice of the market.
Or they have to allocate a significant percentage of their capital into these volatile stocks – and hope the longer-term capital growth provides sufficient compensation for the foregone income.
But what many investors don’t know is that there’s a way to get the best of both worlds…
A way to gain exposure to tech stocks…
While also collecting double-digit yields?
Thanks to the wonders of finance, it’s all possible…
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
JEPQ is an ETF that invests in lower-volatility stocks listed on the NASDAQ. It then writes covered calls on the overall index (aka selling options), which allows it to generate income it can pay to its shareholders.
Meanwhile, its underlying portfolio of lower-volatility stocks “covers” the options being sold.
Yes, it can get a little complicated for the average investor. But the point is this – by investing in JEPQ, you’ll get exposure to both tech stocks AND receive high dividend income on top of that.
So the next question is – how much income? Well, at current prices its annual yield stands at 11.4% – paid monthly. And no, it’s not because its price has been falling – the fund is up nearly 20% this year thanks to the strong performance in tech stocks.
The fund’s expense ratio is currently 0.35% – higher than index funds, but still very reasonable (it is actively managed after all). And when you look at the income AND capital gains you could get, this might just be the best “tech play” for income-focused investors.
To your wealth,
Felix @ Ace of Investing
