JEPQ’s 10% Dividend Is Legendary, But At What Cost?

Core Viewpoint - The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) has attracted nearly $32 billion in assets due to its high dividend yield of 11.52%, but this comes at the cost of potential capital appreciation [3] Group 1: JEPQ's Structure and Performance - JEPQ mirrors the Nasdaq-100 and generates income by selling covered call options, which provide monthly distributions but limit upside during stock rallies [4] - The fund has maintained monthly distributions since its inception in May 2022, with amounts fluctuating between $0.34 and $0.68 per share based on market volatility [4] - JEPQ has a competitive expense ratio of 0.35% and holds a significant portion of its assets in mega-cap technology stocks [4][7] Group 2: Opportunity Cost and Comparison with QQQ - JEPQ's top holdings include Nvidia (8.02%), Apple (7.58%), Microsoft (6.48%), Alphabet (5.88%), and Broadcom (4.95%), which have shown substantial capital appreciation over the years [5] - The Invesco QQQ Trust (QQQ), which does not employ covered calls, has outperformed JEPQ with a year-to-date return of 22.27% and a five-year return of 106.68% [6] - JEPQ's strategy results in an annual return reduction of 10-12 percentage points compared to QQQ, highlighting the trade-off between high income and capital gains [7]