3 Monthly Dividend ETFs for Predictable Income

By Vandita Jadeja Published Feb 10, 7:15AM EST

Quick Read

JEPQ yields 11.58% by selling covered calls on Nasdaq 100 stocks including the Magnificent Seven.
SPHD allocates 21.86% to real estate and avoids heavy tech concentration for lower volatility.
DIVO concentrates holdings in just 31 stocks and uses covered calls for 4.81% yield.

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3 Monthly Dividend ETFs for Predictable Income — © Jack_the_sparow / Shutterstock.com

Whether you’re enjoying your retirement or still planning for your golden years, generating a steady source of monthly income will be your primary goal. While investing in dividend stocks can help build a passive income stream, there’s no guarantee that companies will pay a dividend. On the other hand, you can invest in exchange-traded funds and own a basket of stocks that pay steady dividends.

The professionally managed fund will invest in several dividend stocks, each with its own yield, to ensure a steady stream of income for you. That said, some ETFs also pay monthly dividends, and I’ve identified them for you. These funds are well diversified, financially strong and pay steady monthly dividends. You can rely on them if you seek passive income through your investment portfolio. Let’s take a look at them.

Invesco S&P 500 High Dividend Low Volatility ETF

The Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD | SPHD Price Prediction) tracks the S&P 500 Low Volatility High Dividend Index. It invests in stocks with high dividend yields and low volatility. It has a yield of 4.68% and pays monthly dividends. The fund is ideal for low-risk investors who seek stable income. SPHD focuses on real estate (21.86%), consumer staples (16.50%), and utilities (14.05%). This is one of the rare ETFs that doesn’t heavily rely on the tech sector.

It has an expense ratio of 0.30%. The fund has generated a 1-year return of 3.34%, a 3-year return of 7.37%, and a 5-year return of 9.22%. SPHD invests in top quality companies and includes solid dividend payers in the top 10, including Conagra Brands, Verizon Communications, Pfizer Inc., Kraft Heinz Co. and Healthpeak Properties. Some of these stocks pay monthly dividends, making it easier for SPHD to make the payments.

Since the fund avoids stocks with high volatility, it ensures that you have a portfolio that remains stable even in market downturns. The ETF is exchanging hands for $51.12 and has gained 4.75% in the past year. While it may not offer high capital appreciation, it will ensure steady monthly income. SPHD is a safe ETF to own during market uncertainty.

Amplify CWP Enhanced Dividend Income ETF

The Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) is another ETF with a strong yield of 4.81% and impressive performance. It is an actively managed fund that invests in dividend paying stocks and writes a covered call on them to deliver premium returns.

The fund invests in only 31 stocks and screens them for strong financials. It aims to invest in companies that have a history of paying regular dividends and the ability to sustain them. It offers low volatility, making it ideal for risk-averse investors. The ETF has an expense ratio of 0.56%.

DIVO is heavily concentrated in the financial (26.98%), information technology (16.46%), and consumer discretionary sector (14.12%). These are three of the strongest markets right now, and they will continue to remain strong even in a market turmoil. Its top 10 holdings include Caterpillar Inc., Apple Inc., Home Depot, Microsoft, Visa, Goldman Sachs, JP Morgan Chase, and American Express. These are the top stocks in their respective sectors with a solid upside potential.

The fund has gained 8.87% in the past year and is exchanging hands for $46.29. It has generated an annualized 1-year return of 15.30%, a 3-year return of 14.11%, and a 5-year return of 13.03%. Since it holds only 30 stocks, the weightage on each stock is higher, and the ETF is designed to offer a high total return on a risk-adjusted basis.

JP Morgan Nasdaq Equity Premium Income ETF

An infographic titled "JEPQ: Nasdaq Equity Premium Income ETF for Retirees." The top features a blue and brown circuit board pattern. Section 1, "How the ETF Works (Covered Call Strategy)," is a horizontal flow diagram. It starts with a green box "Portfolio: Nasdaq-100 Tech Leaders (NVDA, AAPL, MSFT)," arrow to a blue box "Strategy: Writes Covered Calls on Holdings," arrow to a blue box "Result: Generates Option Premium Income," arrow to a green box "Distribution: Monthly Payments to Investors." Section 2, "Most Suitable Use Case," shows an illustration of two retirees on a bench and text describing "Income-Focused Retirees Seeking Maximum Current Income & Cushion in Flat/Down Markets," "Willing to Sacrifice Upside Potential for Regular Payments," and "*Not for Full Growth Capture*." Section 3, "Pros & Cons," is divided into two columns. The green column, "PROS (Income & Stability)," lists: High Yield (10.39% Trailing / 11.52% Official), Monthly Payments (44 Consecutive Months), Low Expense Ratio (0.35%) & Large Scale ($31.9B Assets), and Strong Recent Total Return (~26% 1-Year). The red column, "CONS (Risks & Limitations)," lists: Variable Monthly Income (30-40% Fluctuation), Capped Upside (Underperforms in Bull Markets), High Tech Concentration (41.7% Sector Risk), and Tax Inefficient (Mostly Ordinary Income).

The JPMorgan Nasdaq Equity Premium Income ETF (NYSEARCA:JEPQ) is an excellent fund that delivers monthly income and has a yield of 11.58%. It works like DIVO; the fund invests in top-quality stocks and writes out-of-the-money covered call options to generate monthly income. It invests in Nasdaq 100 stocks with a strong dividend yield and low volatility.

The fund holds 108 stocks and has an expense ratio of 0.35%. This is one of the best funds for passive income seekers. It has the highest allocation in the information technology sector (41.9%), communication services (12.6%), and consumer discretionary (11.2%).

Its top 10 holdings include the Magnificent Seven which are Nvidia, Apple, Meta Platforms, Microsoft, Alphabet, Amazon and Tesla. It also includes Walmart — a Dividend King — in its top 10 holdings. JEPQ has the highest allocation in Nvidia and Apple, which together constitute 13.68% of the total portfolio.

It holds these mega-cap tech stocks and sells call options on them. Whenever investors buy these calls, the fund generates a premium that is distributed as a dividend. The strategy works well in uncertain markets.

JEPQ has generated a cumulative 1-year return of 15.19% and a 3-year return of 95.95%. It is exchanging hands for $56.93 and has remained flat in the past year. While the dividends can vary over time, JEPQ will cut you a check each month.

About the Author Vandita Jadeja →

Vandita Jadeja is a financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis. She has contributed to several publications, including the Joy Wallet, Benzinga, The Motley Fool and InvestorPlace.