jepi vs. qyld

JEPI vs. QYLD: Which Covered Call ETF is Best?

Covered calls have become a rage recently. As a result, companies are creating exchange traded funds (ETFs) to perform these covered calls. The good thing about these covered call ETFs is the income potential that may add to your portfolio’s total income. This article will compare JEPI vs. QYLD as two potential covered call ETFs to consider for your portfolio.

Covered call ETFs have higher dividends than most dividend stocks or ETFs like SCHD. For instance, JEPI has a 12-month trailing yield of 11.29%. The nice thing is that JEPI pays its dividends each month, like some REITs. That means you can reinvest those dividends to get more shares for your dividend portfolio.


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Why Would You Choose a Covered Call ETF?

Covered call ETFs differ slightly from dividend growth ETFs. They buy and hold stocks hoping to sell covered call options to investors to create income through the premiums generated. 

Most people may start getting into covered called ETFs for the high-income reward. JEPI, for example, is distributing around $6.30 a year divided into 12 monthly payments. QYLD has a 12-month rolling yield of ~13.45%, bringing extra income to investor portfolios.

Let’s break down the differences between these two ETFs. 

JEPI: JPMorgan Equity Premium Income ETF

JEPI is the JPMorgan Equity Premium Income ETF, a covered call ETF seeking to deliver monthly distributive income while having exposure to the market with low volatility. The fund invests in U.S. large-cap stocks. The fund started on May 20, 2020.

With ~133 different holdings, it sells out-of-the-money S&P 500 Index covered call options to generate income through premiums collected on the covered calls and by dividends. It has generated a 12-month rolling dividend of about 11.29% and a 30-day SEC yield of 11.15%. 

The United States 1-year Treasury bonds have an income of 4.7% for 12 months, and savings accounts range from roughly 3% to over 4%. Now compare that with some other high-income assets. The VOO and VTI ETFs have a yield of around 1.69%, and a high-growth dividend ETF like SCHD yields approximately 3.45%. 

The ETF comprises assets on the S&P 500 Index and allows for price appreciation. Their active managers work hard to create an income-producing investment for their owners. With a 12-month rolling yield of 11.29% and a 30-day SEC yield of 11.77%, you will have more income coming in over most of these other assets that yield less.

Portfolio

JEPI’s portfolio has the most assets in Other at 15.7%, followed by Industrials at 12.3%. The next top three sectors are Financials at 12.0%, Health Care at 11.9%, and Information Technology at 11.8%.

The top 10 holdings of JEPI:

TickerCompanyWeighting (%)
PGRProgressive1.63%
ABBVAbbVie1.48%
MAMastercard1.46%
HSYHershey1.42%
VVisa1.41%
BMYBristol-Myers Squibb1.40%
TRVTravelers1.37%
USBUS Bancorp1.37%
KOCoca-Cola1.37%
UNHUnitedHealth Group1.36%
Source: J.P. Morgan Asset Management website (as of February 09, 2023)

The top 10 holdings make up about 14.27% of the fund.

QYLD: Global X Nasdaq 100 Covered Call ETF

QYLD Nasdaq 100 Covered Call ETF seeks to generate income by selling covered calls in high volatility times. The fund follows a “buy-write” strategy, in which the Fund buys stocks in the Nasdaq 100 Index and “writes” or sells call options on the same Index.

The ETF has been distributing income for nine straight years. The fund’s inception date was December 11, 2013. QYLD aims to be more effective than individually selling the covered call options. 

If the market is rallying, this ETF will only create a little income, with a higher chance of investors exercising their options. However, with a 12-month rolling dividend of ~13.45%, you should be expecting more revenue while they are selling covered calls. So, in the last 30 days, the 30-day SEC yield has been ~0.39%. 

The overall performance of QYLD in the last five years has been 3.00%, and since its inception, the total return has been about 5.64%. So even if the index rises, QYLD does not increase too much. 

Portfolio

QYLD’s portfolio focuses on Information Technology, the most owned sector at 49.79%. The second and third most prominent sectors are Communication Services at 16.01% and Consumer Discretionary at 14.26%. Combined, these three sectors make up over 80% of total assets. QYLD has minimal exposure to the Energy sector. In addition, it has no holdings in the Basic Materials, Financials, and Real Estate sectors.

The top 10 holdings of QYLD:

TickerCompanyWeighting (%)
MSFTMicrosoft13.27%
AAPLApple13.07%
AMZNAmazon.com6.79%
NVDANvidia4.83%
TSLATesla4.44%
GOOGAlphabet (Class C)3.94%
GOOGLAlphabet (Class A)3.92%
METAMeta Platforms3.52%
AVGOBroadcom2.13%
PEPPepsiCo2.09%
Source: Global X website (as of February 09, 2023)

The top 10 holdings make up about 58.00% of the fund with Microsoft and Apple at over one-quarter of the total assets.

Significant Differences Between JEPI vs. QYLD

Comparing JEPI vs. QYLD, a couple of differences make one ETF more appealing than the other.

TickerJEPIQYLD
NameJPMorgan Equity Premium Income ETFNasdaq 100 Covered Call ETF
IndexS&P 500 IndexNasdaq 100 Index
Number of Stocks133102
Expense Ratio0.35%0.60%
Price$54.37$16.97
30-Day SEC Yield11.15%0.39%
P/E Ratio18.75X25.24X
Total Assets$20.25B$6.81B

JEPI vs. QYLD: The Dividend Yield

JEPI has a 12-month rolling yield of 11.29%, so over the 12 months, the dividend yield is averaging over 11.29%. That is an extraordinary dividend compared to regular dividend ETFs. QYLD has had a dividend yield of 13.45% over the last 12 months. The dividend of the previous 30 days was much lower for QYLD than JEPI, but with rising markets, QYLD will likely do worse because they are not writing covered calls. It is better suited for volatile times.

JEPI vs. QYLD: The Overall Performance

JEPI has been growing more over the extended range of the performance of these two funds. It has only been around since 2020, but in 2021 it had an overall performance of 21.61%, and since inception, it has had over 13% in total performance. 

QYLD is an ETF focused more on income rather than price appreciation. The inception date was December 2013, and the average performance since inception has been 5.64%. In the long run, the fund will not increase as much as JEPI in price appreciation.

In the short time JEPI has existed, it has outperformed QYLD. But the fund has yet to exist long enough to observe its performance through multiple market conditions.

JEPI vs. QYLD: The Expense Ratio

The expense ratio is how much it costs to own the fund. So, VOO a, S&P 500 Index ETF has an expense ratio of 0.03%, which means that for every $10,000 invested, it will cost you $3 in fees. 

JEPI has an expense ratio ten times greater at 0.35%, meaning it costs $35 for every $10,000 invested. QYLD has an even greater expense ratio of 0.60%, which means it costs $60 for every $10,000 invested. QYLD has a much higher expense ratio costing more money to hold it in your portfolio. 

Since these are both actively managed funds, they must pay the managers to make the decisions on their covered calls. Therefore, based on the expense ratio, JEPI is the hands down winner vs. QYLD.

JEPI vs. QYLD: The Portfolio Construction and Composition

Both portfolios are created differently. JEPI is comprised of companies in the S&P 500 Index, and price appreciation happens with these holdings. It has a broader range of stocks for the managers to pick and choose from in different sectors owned by the fund. The ETF picks more defensive equities for its portfolio.

QYLD holds stocks in the Nasdaq 100 index and sells the covered calls based on those holdings. The Index consists of many growth and tech companies that may fall and rise. Also, it is simply not as diverse of a portfolio as JEPI.

Comparing JEPI vs. QYLD, the funds are focused on different sectors. JEPI is more diversified, while QYLD is concentrated in the Information Technology sector with roughly 50% of the total assets and half that in two stocks. Also, QYLD does not invest in stocks in the Basic Materials, Financials, and Real Estate sectors. Both ETFs deemphasize the Basic Materials, Energy, and Real Estate sectors.

SectorJEPIQYLD
Basic Materials2.9%0%
Consumer Discretionary6.1%14.26%
Consumer Staples10.8%6.67%
Energy3.0%0.49%
Financials12.0%0%
Healthcare11.9%7.31%
Industrials12.3%4.00%
Real Estate2.6%0%
Information Technology11.8%49.79%
Telecommunications3.8%16.01%
Utilities7.0%1.46%
Other15.7%N/A
Source: J.P. Morgan Asset Management and Global X websites (as of February 09, 2023)

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JEPI vs. QYLD vs. VOO

If you compare these two covered call ETFs to the  Vanguard S&P 500 ETF (VOO), you see that the price appreciation will be different. There needs to be more data to conclude that JEPI will outperform the S&P 500 Index over time, but as an active fund in the long run, it may be challenging to beat the market.

Since QYLD dates back to 2013, we can see that from January 2014 until now, VOO had an annual average performance of 11.15%, and QYLD averaged 6.05% per year. 

However, for pure income, JEPI and QYLD will both beat VOO.

Related Article About VOO on Dividend Power

JEPI vs. QYLD: Similarities Between the Two Funds

The funds have differences, but they are also similar in two ways.

  • Distribute monthly dividends.
  • Generate income by writing call options.

Which Covered Call ETF Is Best?

The choice is yours on which covered call ETF you think is best. QYLD offers superior income potential compared to JEPI. However, as stocks rise, the fund will see less of an increase. If you are only looking for options to add income to your portfolio, QYLD could be the best choice. 

JEPI is a more balanced pick. It looks for income and overall performance. For those wanting more price appreciation and income JEPI could be the best choice. In 2021, when the S&P 500 Index was up over 27%, JEPI was sitting at a gain of 21% and had a reasonable dividend yield to give to their investors. 

The ETF choice is yours. Select the one that fits your needs best.

Disclosure: None

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Steve Cummings is the founder of the personal finance blog The Frugal Expat. As a traveler and expat, he has learned a lot about how to save money, live frugally, and invest for the future. His mission is to help people in saving, investing, reaching financial independence, and traveling.

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