Skip to main content

Even though 2022 was a year to forget, it did present some opportunities for investors. In particular, dividend income seekers have many more chances to capture not just reasonable, but in some cases downright enticing, yields.

The improvement is very clear on the fixed income side. For much of the past decade, investors earned virtually nothing on their cash or cash alternative investments. Today, you can get a 4% yield from the iShares Short Treasury Bond ETF (SHV), which is nothing more than a portfolio of Treasury bills.

Or take a look at junk bonds. Yields in the 4-5% range were the standard as recently as a year ago (without really pushing far out on the risk spectrum). Today, the SPDR Bloomberg High Yield Bond ETF (JNK) pays 8.3%.

Equity strategies are seeing similar yield boosts. Traditional indexes, such as the S&P 500, still won't net you much more than 2%, same as before, but if you expand your world view to include strategies using options, closed-end funds or alternative assets, double digit yields are within your reach. These aren't just strategies that ratchet up the risk or overweight speculative investments either. These are risk-aware strategies that invest in familiar asset classes.

That makes these funds ideal for at least some consideration in your retirement portfolio. You don't necessarily want to overweight these funds or make them the core of your retirement income strategy, but adding them judiciously to an otherwise diversified portfolio can provide anyone with a nice income boost. Because they have comparatively low correlations with other traditional asset classes, adding one of these ETFs has the potential to actually reduce portfolio risk while boosting yield.

Of course, any fund or ETF that comes with an ultra-high yield warrants a deeper look under the hood to make sure you know what you're buying! Let's take a look at four ETFs with 10%+ yields that look particularly enticing right now.

JPMorgan Equity Premium Income ETF (JEPI)

JPMorgan Equity Premium Income ETF (JEPI)

JPMorgan Equity Premium Income ETF (JEPI)

Current Yield: 14.1%

Trailing 12-Month Yield: 11.6%

JEPI used to be an under-the-radar high yielder, but no longer. A fund that had less than $200 million in assets just two years ago has turned into a $17 billion behemoth. In 2022, it had the 7th largest net inflow (at just short of $13 billion) of all 3,000 U.S. listed ETFs!

JEPI is effectively a covered call ETF. It's a little non-traditional in that instead of selling call options on individual stocks or indices, it buys equity-linked notes (ELNs). These are essentially securities that have an index and written call option bundled together. It's a structural difference, but it pretty much behaves just like a covered call ETF.

JEPI's underlying portfolio consists of defensive, low volatility equities selected by a bottom-up fundamental research process. The ELNs consist of written out-of-the-money call options based on the S&P 500.

Part of the reason the yield has gotten so high (around 14% currently) is that the higher market volatility of the past year increases the cost of options contracts. Higher premiums equal more income for the fund and that translates into higher yields for JEPI.

JEPI has simply become one of my favorite high yield ETFs. The 14% yield probably won't sustain indefinitely (prior to this, it usually yielded around 8-10%). But over its relatively brief history, it's matched the performance of the S&P 500 with about 30% less risk. That fits into almost any retirement portfolio!

Global X S&P 500 Covered Call ETF (XYLD)

Global X S&P 500 Covered Call ETF (XYLD)

Global X S&P 500 Covered Call ETF (XYLD)

Current Yield: 11.4%

Trailing 12-Month Yield: 13.4%

XYLD is more of your traditional, plain vanilla covered call ETF. Its strategy is very straightforward and doesn't add any frills, but it tends to deliver what it sets out to do about as well as any similar ETF out there.

This fund essentially replicates the entire S&P 500 at the individual holding level. It then overlays written at-the-money call options over the entire index that generally expire within about a month. The 100% overlay and at-the-money nature of the options strategy tends to maximize income potential, but it also increases the odds of the option getting called, thus decreasing share price upside.

One unique feature of XYLD is that it caps monthly income distributions at 1% of assets. Anything it earns beyond that (and it frequently does earn more than the 1% cap) goes back into the fund's net asset base, helping to increase the fund's share price. 100% options overlay strategies often limit virtually all share price upside potential, but XYLD's ability to earn more than 1% monthly makes it a unique case that provides both high income and some share price appreciation potential.

Because it's such a simple income strategy based on the S&P 500, this is a fund that can actually occupy a larger portion of your portfolio without adding on excessive risk.

Amplify High Income ETF (YYY)

Amplify High Income ETF (YYY)

Amplify High Income ETF (YYY)

Current Yield: 11.7%

Trailing 12-Month Yield: 12.4%

There's a universe of income seekers that prefer to do business in closed-end funds (CEFs) instead of ETFs for high yield. In a lot of cases, these funds offer yields of 10% or higher, but they come with a number of unique features that investors should be aware of. For instance, a lot pay fixed monthly distributions, something that may or may not be sustainable making them prone to cuts over time. Many also use leverage to enhance yields and return potential. It sounds like an attractive idea on the surface, but this ramps up volatility quite a bit and many don't generate the requisite extra return to make it worth it.

A lot of CEF investors benefit from having a professional money manager do the research and work for them. That's what YYY does. It invests in approximately 45 different CEFs across multiple strategies and issuers. Among its primary considerations are relative value (discount to NAV), yield and liquidity. The resulting portfolio is yield-weighted. Right now, the asset allocation is 80% bond CEFs and 20% equity.

A fund like this is probably best used in small quantities unless you're a little more experienced in CEF investing. The potential use of leverage and fluctuating discounts/premiums to NAV can really add to volatility and negatively impact your portfolio if you're overexposed. A small allocation used as a yield booster in a broader portfolio can still make some sense.

Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

Screen Shot 2023-01-03 at 4.46.01 PM

Current Yield: 10.7%

Trailing 12-Month Yield: 9.9%

Preferred stocks can be an under-appreciated and often ignored part of a portfolio. From a yield perspective, however, they can be a nice way to capture a high yield that both limits and diversifies risk.

PFFA is the 10th largest ETF focused on preferred securities with nearly $500 million in assets. It invests in a diversified portfolio of preferreds with security selection and weightings based on a variety of quantitative, qualitative, and relative valuation factors. One thing to consider here is that PFFA typically utilizes between 20-30% leverage in order to enhance portfolio beta. Options strategies may also be used in an effort to enhance current income. The risks and rewards of these strategies have already been discussed above.

Preferred stockholders sit above common stockholders but behind bondholders in the order of claim priority should the issuing company need to liquidate. It's a modest advantage since most companies don't go bankrupt, but it's enough to help limit some risk. The yields are typically above average, but the share price upside potential is typically more limited.

This makes them appropriate as a more conservative means of enhancing a portfolio's yield. The iShares Preferred & Income Securities ETF (PFF) offers more traditional exposure without the options strategy or leverage, but it also offers a more modest 6% yield currently.


ETFs with 10% Yields

ETFs with 10% Yields

Retirement investors certainly have a more favorable environment today than they had a year ago. The 20-30% declines in the value of both stocks and bonds certainly came at an inopportune time, but yields are now such that they make generating a livable yield much easier.

4% yields can be had for merely parking your money in cash. Investment-grade bonds can net you 5-6%. Junk bonds can get you 8%. If that's not enough, 10% yields are finally available without blowing the doors off in terms of risk.

None of the ETFs listed above should be the core of your income portfolio (although I wouldn't have any complaints if you overweight JEPI or XYLD), but used modestly they can offer a nice yield boost without significantly altering your portfolio's overall risk profile.

Read More…

Best Dividend ETFs

Best Semiconductor ETFs

Best Treasury ETFs

Best Ultra Short-Term Bond ETFs

Best High Yield Covered Call ETFs


Best Energy ETFs

Best Technology ETFs

Best Cloud Computing ETFs

Best Large Cap ETFs

Best Small Cap ETFs

Best High Yield Bond ETFs

Best Cannabis ETFs

Best Blockchain ETFs

QQQ vs. QQQM vs. QQQJ: What To Expect From The Big 3 Nasdaq ETFs

VTI vs. ITOT: Comparing The Vanguard & iShares Total Market ETFs