1 ETF That Will Pay You Monthly
If you want to get paid monthly, you’ll probably struggle to find ways in the stock market. While real estate offers a straightforward path to collecting rent checks monthly, dividend investing is generally limited to paying shareholders on a quarterly schedule.
Some rare exceptions do exist, such as Realty Income, which is known as The Monthly Dividend Company. It is a REIT and so given the heightened concerns around commercial real estate not bouncing back, investors are naturally looking for alternatives.
One that stands out is an offering by Jamie Dimon’s firm, called the JPMorgan Equity Premium Income ETF, with ticker symbol JEPI. This fund will pay out a monthly check, but is it worth it?
Key Points
- Monthly dividend-paying stocks are rare, with most paying quarterly. JEPI is an alternative to Realty Income and also pays monthly.
- JEPI yields just under 7% annually and holds nearly 130 stocks. It provides steady income by selling calls on holdings.
- JEPI is ideal for those needing consistent monthly income with some share price growth.
How To Get Paid Monthly
When you buy JEPI what you are really getting is a collection of almost 130 individual stock holdings, including many of the Magnificent 7, none of which constitutes more than 2% of the overall fund.
The yield comes in just shy of 7%, meaning that it eclipses the 3-month Treasury bill yield but still relies on share price appreciation to goose the overall returns to be more in line with the S&P 500.
It works out to be just over 0.5% monthly on assets invested so it’s not a home run opportunity to earn income unless you had a lot to invest. A $1,000,000 commitment would translate to about $5,000 per month. Naturally, a lot of investors will have less to invest but even at $50,000 invested, an extra $250 monthly can be a nice stipend.
The reason to buy JEPI though isn’t just because you want gains, you really must want and perhaps even need a monthly paycheck. For those who have monthly bills to pay but lack a monthly income source, JEPI is a match.
Is JEPI Worth It?
While JEPI offers a monthly source of income, it does have some drawbacks, and you might even have been wondering about them. Like how does JEPI pay monthly when most of the stocks it owns pay quarterly dividends?
The answer to that conundrum is that JEPI fund managers sell call options on stocks held in order to produce a regular stream of income to fund owners. The positive aspect of this structure is the regularity of income. The drawback is that calls limit upside potential, so if a stock roars higher during the month and fund managers have sold calls at a strike price that caps the upside, fund investors will not benefit fully from the share price appreciation.
As a result, JEPI isn’t for investors who are solely looking for price gains, but rather want and prefer a sustainable stream of steady income.
It’s also good to be aware that, unlike Realty Income which is a REIT backed by real estate, JEPI is likely going to be more volatile when market swings occur because stocks in general will be fluctuate more than real estate during boom and bust periods.
Still, if you’re looking for a predictable income stream with decent share price appreciation, it’s hard to go too far wrong with JEPI.
