FDVV, SCHD, and JEPI Look Like Great Buys Together

By Joey Frenette Published Oct 24, 10:12AM EDT

Key Points

FDVV, SCHD, and JEPI are stellar income ETFs, but they’re even better when bought together, at least in my view.
What’s to love about this income trio? The FDVV gives a slight tech tilt, the SCHD adds more defensiveness, while the JEPI is an income booster (and beta reducer).

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FDVV, SCHD, and JEPI Look Like Great Buys Together — © Dmitry Demidovich / Shutterstock.com

There are too many great dividend ETFs out there to keep track of these days. However, more choice is a good thing, especially if you’re in the market for something very specific. Additionally, an abundance of choice in the ETF scene has also driven down expense ratios (the fees you’ll pay) to rock-bottom levels. In this piece, we’ll have a look at a trio of income ETFs that I think could be best bought together.

So, whether you’re looking for more yield, less volatility, or a better balance of defensive growth, the following ETFs, I think, are worth keeping tabs on.

Fidelity High Dividend ETF

First, we have the Fidelity High Dividend ETF (NYSEARCA:FDVV | FDVV Price Prediction), a 3.1%-yielding ETF that I view as a top pick for investors who want a decent payout without having to settle on limited capital appreciation. Over the past two years, the FDVV has gained just north of 48%. That’s a pretty impressive performance that’s nearly kept up with the S&P 500. With more technology exposure than most other dividend ETFs that yield more than 3%, the FDVV seems primed for relative outperformance should this AI boom continue for many years to come.

Of course, if an AI correction happens, the FDVV could underperform relative to dividend-focused ETFs with far less tech exposure. Either way, I think the FDVV is a great way to do well over the long term by allowing for more income without requiring investors to shut out (at least for the most part) the top tech innovators that stand to gain the most as the AI revolution plays out.

In short, the FDVV is a 3.1%-yielder with a slight tech tilt relative to most other income ETFs out there. Given the productivity gains that AI can provide to the broad economy, I think such a mild tech tilt ought to be desirable. Not to mention the potential for faster distribution growth as tech trends lead to greater profitability in the near- and distant-future.

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is an easy buy if you want to own equities that average a yield that’s close to 4%. Today, the yield is below 3.8%, but the yield-heavier ETF, I think, remains a great complement to any ETF portfolio, especially one that’s more growth-centric (perhaps one that’s heavier in the FDVV than ETFs with yields north of 4%).

With a beta of around 0.80, the SCHD also stands out as a more defensive dividend ETF to hold through hard times. While the S&P 500 or a slightly growthier income ETF like the FDVV is bound to outperform on the way up, the SCHD looks better equipped to fall less on the way down. Though not the most defensively positioned ETF in the world, the SCHD is a steadier component in the trio of ETFs outlined in this piece.

JPMorgan Equity Premium Income ETF

Finally, we have another wildly popular ETF in the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI), one of my favorite options of the premium income ETFs out there. Indeed, through the use of derivatives (covered calls), the JEPI has been able to achieve a higher yield (8.4% yield) with a lower beta (0.57).

Indeed, larger dividends and less correlation to the S&P make for a much less volatile ride, which could prove worthwhile should the S&P’s magnificent rally begin to taper off or trend lower. Either way, the JEPI is a holding that could pay dividends if the pace of market gains slows. Indeed, with the JEPI, you won’t get as much capital gains as with the S&P.

But, at the very least, you’ll be able to pocket the premiums coming in, which, while always on the move, is a great incentivizer to stay aboard longer term. For those in need of a yield booster, the JEPI is a worthy supplement, in my view. With a name like JPMorgan, I think it’s tough to look elsewhere, especially for those looking for more income without having to take on substantially more risk.

In a way, the JEPI is a yield powerhouse that can help add stability, but with capped upside, the name might not be the best to overweight in for the growth-minded investors out there. Personally, I’d start building an ETF on the SCHD and FDVV, while adding JEPI to adjust the portfolio’s overall yield to the right spot. Perhaps the JEPI is the right addition to a SCHD-FDVV portfolio that averages a yield in the 3.5% (or so) range to get that figure closer to 5% or even 6%.

In short, the JEPI is a great tool that income investors should use effectively, preferably alongside the likes of other ETFs.

About the Author Joey Frenette →

Joey is a 24/7 Wall St. contributor and seasoned investment writer whose work can also be found in publications such as The Motley Fool and TipRanks. Holding a B.A.Sc in Computer Engineering from the University of British Columbia (UBC), Joey has leveraged his technical background to provide insightful stock analyses to readers.

Joey's investment philosophy is heavily influenced by Warren Buffett's value investing principles. As a dedicated Buffett disciple, Joey is committed to unearthing value in the tech sector and beyond.