Are QQQX 8% Dividends Good For Retirees?

By John Seetoo Published Sep 22, 10:41AM EDT

Key Points

The Nuveen NASDAQ 100 Dynamic Overwrite Fund is one of the earlier covered call closed end funds to have launched, having begun in 2007.
Although it has paid quarterly dividends throughout its history, Nuveen is considering switching to a monthly payout to better compete with rival offerings from JP Morgan and others.
Retirees seeking steady income combined with a strong upside potential due to the heavily technology stock weighted Nasdaq 100 Index might want to consider QQQX, especially if it switches to monthly dividends, since more frequent payouts will likely attract Gen-Z and other dividend-interested investor demographics.

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Are QQQX 8% Dividends Good For Retirees? — © PIKSEL from Getty Images and utah778 from Getty Images

Although covered call ETFs and CEFs are all the rage, the first ones in the industry actually launched in 2004, with BlackRock’s Enhanced Capital and Income Fund, followed by several others. The Nuveen NASDAQ 100 Dynamic Overwrite Fund (NASDAQ: QQQX) premiered in 2007, and has been solidly performing in its tracking of the Nasdaq 100 Index ever since.

Dividends To Hedge Tech Volatility

QQQX mitigates a sizable percentage of Nasdaq 100 volatility with a covered call strategy that translates into fairly significant dividends for its shareholders.

The Nasdaq 100 Index is a popular stock index of Nasdaq listed stocks. It has gained increased attention due to the Magnificent 7 stocks (Amazon, Apple, Alphabet (Google), Microsoft, Meta Platforms (Facebook), Nvidia, and Tesla) all being listed on Nasdaq. However, unlike with the S&P 500, few of the stodgier banking, insurance, and defensive companies trade on Nasdaq, thus making the Nasdaq 100 more aggressively weighted towards technology.

As a result, in a comparison between the Nasdaq 100 vs. the S&P 500 over the past 20 years, $10,000 invested in 2005 grew to the following amounts by 2025:

S&P 500: $10,000 in 2005 > $73,947 in 2025
Nasdaq 100: $10,000 in 2025 > $155,492 in 2025.

Of course, the high-flying tech stocks carry with them commensurate volatility, which is the foundation for the YieldMax covered call single stock ETFs. Acknowledging that the entire Nasdaq 100 index carries a multiplied level of volatility, QQQX mitigates a sizable percentage of this volatility with its covered call strategy, which is underwritten against 35-75% of the portfolio at any given time, based on the portfolio manager’s discretion.

On the plus side, this results in ample call option underwriting premiums that supply the fuel for QQQX dividends, which equate to a yield of 8.23% as of market price at the time of this writing. On the down side, the call option strategy caps the gain on the Nasdaq 100 upside so the growth only generates a percentage of the overall index gain.

An overview of QQQX includes the following details:

Yield	8.23%	Expense Ratio	0.89
Number of Stocks	200	Avg. Daily Volume	118,309 shares
Mkt. Price	27.22	Avg. Option Coverage	56%
NAV	29.86	1-year return	18.05%
Mkt Price/NAV discount	-8.84%	5-year return	8.11%
Net Assets	$1.423 billion	10-year return	12.06%

The Retiree Perspective

Senior Asian couple playing and teasing each other Happy family concept together outside the house Enjoy a fun lifestyle during retirement. Family health care

Retirees who find QQQX’s 8.23% yield and upside potential attractive may get a capital appreciation bump if the fund changes distributions from quarterly to monthly.

As so many income-oriented investment products vie for market share of the huge Boomer retiree demographic, a vehicle with 8% dividends and a chunk of Nasdaq 100 growth certainly has appeal. The fact that it trades at a discount to NAV is another plus in its favor, since the differential is an extra risk mitigation factor.

The possible caveats are: the relatively small daily trading volume, which could remotely be a potential liquidity issue, and the 200 different stocks in its portfolio, which indicates that QQQX doesn’t completely stick with its Nasdaq 100 benchmark. Veering too far away from it could potentially have an adverse effect on QQQX if its covered calls wind up being naked, instead.

One prospective plus side decision remains undeclared to date: Nuveen is reportedly considering changing its dividend payout schedule from quarterly to monthly, to better compete with many of its newer rivals. Such a move will likely lead to an influx of more buying from Gen-Z investors and others who crave more frequent dividend distributions for their DRIP program dividend compounding strategies. This would likely lead to a higher market price for QQQX as well.

About the Author John Seetoo →

After 15 years on Wall Street with 7 of them as Director of Corporate and Municipal Bond Trading for a NYSE member firm, I started my own project and corporate finance consultancy. Much of the work involves writing business plans, presentations, white papers and marketing materials for companies seeking budgetary allocations for spinoffs and new initiatives or for raising capital for expansion or startup companies and entrepreneurs. On financial topics, I have been published under my own byline at The Motley Fool, a673b.bigscoots-temp.com, DealFlow Events’ Healthcare Services Investment Newsletter and The Microcap Newsletter, among others. Additionally, I have done freelance ghostwriting writing and editing for several financial websites, such as Seeking Alpha and Shmoop Financial. I have also written and been published on a variety of other topics from music, audiophile sound and film to musical instrument history, martial arts, and current events. Publications include Copper Magazine, Fidelity (Germany), Blasting News, Inside Kung-Fu, and other periodicals.